10 institutions link in open banking test

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10 institutions link in open banking test

Korea has taken its first step in open banking by allowing customers to use the app of one bank to manage an account at another.

The trial run started Wednesday, with 10 banks participating in the pilot.

Under the new system, customers can check balances and transfer money within the open banking program universe of institutions.

In announcing the test Tuesday, the Financial Services Commission (FSC) said participants include NH Nonghyup Bank, Shinhan Bank, Woori Bank, KEB Hana Bank, Industrial Bank of Korea and KB Kookmin Bank.

The commission said it received applications from a total of 18 banks and 138 fintech firms for the open banking trial, and the FSC decided to start initially with 10 banks and watch the progress.

In open banking, financial institutions make their application programing interfaces (APIs) available to third parties. This allows service providers and other institutions to integrate the account information and related functionality with their own systems.

Strictly speaking, the test announced Tuesday is not full-fledged open banking, as the APIs are not widely available and are restricted to a pre-defined group.

Each app from the 10 banks comes with an “open banking” icon that allows users to input account numbers and gain access to their accounts at other banks.

Customers no longer have to individually log into their bank accounts to access the accounts and account services.

The FSC plans to green light the other 8 for the trial service later depending on their readiness. It will allow for full open banking, which would permit fintech firms to connect, starting Dec. 18.

Open banking is being pursued because the individual institutions, with closed systems, have been charging high fees and have not been competitive. Their systems are also relatively inconvenient for users.

Without open APIs, it has been difficult for innovative companies to develop new solutions for finance, as integrating and working with banking data is complicated or impossible across platforms.

In the open banking environment, fees will be lowered by up to 90 percent. Money transfers will cost about 50 won ($0.04).

The open banking system runs almost 24 hours a day. Maintenance takes only 10 minutes, from 11:55 p.m to 00:05 a.m. daily.

The FSC added it will thoroughly test the open banking service during the trial period and work to establish legal support for open banking so it can draw more fintech firms to participate in the system.

The commission ultimately wants to expand the open banking system to open finance starting 2020, which would include members of the non-banking sector. It also wants to expand the API-based services to beyond account balance checking and wire transfers.

BY KO JUN-TAE [ko.juntae@joongang.co.kr]
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