Open Banking Application Programming Interface in Hong Kong: Paper Example

Introduction

The use of open banking Application Programming Interface (API) was approved by the banking and financial industry in Hong Kong in July 2018 (Goldfinch, 2018). Banks, fintech startups, and insurtech are migrating the industry with easy-to-use applications and solutions. However, one disadvantage preventing this revolution from taking the next step is that they all use their specific interface for their data and information (Solodkiy, 2019). Therefore, Swiss open up a commercial purpose API seeking to change this by establishing a standard Application Programing Interface layer which ensures a uniform and consistent way of managing information exchange throughout the industry. The research was undertaken to analyze the open banking Application Programing Interface model and its significance in the Fin-tech sectors in Hong Kong. Numerous previous academic research has been done, hence this research is not new but a form of an existing research subject. Qualitative research was used in order to achieve all the objectives of the study. Methods of analysis were interviews and questionnaires, and data were analyzed in the form of charts and graphs.

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Literature Review

According to Lai, (2018), in the FinTech ecosystem, Open Bank Application Programing Interface is a significant technology in the FinTech Market. Open Banking Application Programming Interface (API) offers financial services like processing foreign currency accounts, credit card application requests, mortgage loan application requests, unsecured, or secured loan application requests (Lai, 2018).

PSD2: The Digital Transformation Accelerator for Banks

PSD2 APIs is to redefine the financial services distribution game of banks and Fintech products (Dapp, 2015). The traditional bank may see PSD2 XS2A and APIs as an opportunity to open up their bank sector and work closely with emerging fintech companies (Cortet, 2019). PSD2 aims to securely open up the payments market for innovative providers in response to the drivers of ever-changing consumer behavior and expectations and technology-driven innovation (Colangelo, 2018). PSD2 XS2A can be perceived as an accelerator of an API-driven digital business model for financial institutions.

The NextgenPSD2 Framework in A Pan- European PSD2

Scheja (2019), stated that the standardized framework had been implemented at a large scale across Europe's financial market. As the interactions between the clients and the financial service providers are becoming digital, there is a need for a traditional bank to offer customer-centric services with a new open Bank Application Programing Interface model. Added value with optimal reachability across Europe can be generated from the third-party application that is built on top of NextGen PSD2 standards and architectures, as a tool to develop new use cases of the PSD2 Data and define new services models (Solodkiy, 2019).

Research Methodology and Methods

A qualitative method of research was used since it aims to gather a deeper understanding of open banking and the reasons for using the application programming interface. This method analyses the why and how of decision-making. Also, the researcher will be able to investigate the phenomenon in statistical and numeric representation. The qualitative research advantage is that it can offer a full analysis of research without discriminating the goal of the study and the nature of participants as compared to quantitative research.

The respondents were given questionnaires, and interviews were conducted with a few experts in the field. The research was conducted in twenty-three banks in Hong Kong, from annual bank reports and government financial departments. The questionnaire inquires information about the success of open banking in the fin-tech industries. It also has questions related to previous methods that were used to support fin-tech industries through the Application Programming Interface in the banks. Charts and graphs were also used to analyze data.

Results and Discussion

The respondents gave a positive response and were very cooperative in terms of filling in the questionnaires. Hong Kong's financial industry response was also very promising. Twenty banks out of twenty-three have already adopted the system and are in for it. Data would be more accessible, and consumers can access new services and applications. The open banking Application Programing Interface gives access to procedural simplifications through cross-referencing databases. However, Hong Kong lags with the Application Programming Interface open banking model since it is not a well-developed city in terms of technology.

Conclusion

In conclusion, the open banking Application Programing Interface model offers significant advantages and opportunities to the banking and Fin-Tech industries in Hong Kong. The methods used in the research were very appropriate, and the statistical data collected was very efficient. All the privacy rules complied with during the study. The qualitative data collected from the questionnaires were analyzed, and both inferential and descriptive statistics were achieved. This ensured accurate data was given out. The use of charts and graphs gives the readers a clear understanding and interpretation of data.

References

Colangelo, G., & Borgogno, O. (2018). Data, Innovation, and Transatlantic Competition in Finance: The Case of the Access to Account Rule.

Cortet M, Rijks T, Nijland S. PSD2: The digital transformation accelerator for banks. Journal of Payments Strategy & Systems. 2016;10(1):13-27. https://search-ebscohost-com.liverpool.idm.oclc.org/login.aspx?direct=true&db=bth&AN=114579751&site=eds-live&scope=site. Access August 21, 2019.

Dapp, T., & Slomka, L. (2015). Fintech reloaded-Traditional banks as digital ecosystems. Publication of the German original, 261-274.

Goldfinch, P. (2018). A Global Guide to Fintech and Future Payment Trends. Routledge.

Hong Kong Monetary Authority - Phased Approach. 2019. Hong Kong Monetary Authority - Phased Approach. [ONLINE] Available at: https://www.hkma.gov.hk/eng/key-functions/international-financial-centre/open-api-for-banking-sector/phased-approach.shtml. [Accessed 21 August 2019].

Lai, K. (2018). HMKA: regtech is one answer to an increase in regulation. International Financial Law Review.

Open API in Hong Kong | Hong Kong Lawyer. 2019. Open API in Hong Kong | Hong Kong Lawyer. [ONLINE] Available at http://www.hk-lawyer.org/content/open-api-hong-kong. [Accessed 21 August, 2019].

Passi LF. An open banking ecosystem to survive the revised Payment Services Directive: Connecting international banks and FinTechs with the CBI Globe platform. Journal of Payments Strategy & Systems. 2018;12(4):335-345. https://search-ebscohost-com.liverpool.idm.oclc.org/login.aspx?direct=true&db=bth&AN=135550741&site=eds-live&scope=site. Accessed August 21, 2019.

Scheja O, Machielse W. The NextGenPSD2 Framework in a pan- European PSD2 Account Access context. Journal of Payments Strategy & Systems. 2019;13(1):54-65. https://search-ebscohost-com.liverpool.idm.oclc.org/login.aspx?direct=true&db=bth&AN=135591809&site=eds-live&scope=site. Accessed August 21, 2019.

Solodkiy, B. V. (2019). What Do PSD2 and Similar Activities Mean for Banks and FinTech Startups?. The RegTech Book.