Hong Kong Monetary Authority Launches Open Application Programming Interface Framework for the Banking Sector
On July 18, 2018, the Hong Kong Monetary Authority (HKMA) published the Open Application Programming Interface (API) Framework (Framework) for the Hong Kong banking sector.
The formulation of the Open API Framework is one of the seven initiatives announced by the HKMA in September 2017 to prepare Hong Kong to move into a new era of Smart Banking. Open API can help to ensure the competitiveness of the baking sector, encourage more parties to provide innovative and integrated services that improve customer experience, and keep up with worldwide development on the delivery of banking services.
APIs can be seen as the interfaces between software applications, both within an organization and between organizations. APIs enable communication calls upon the functionality of or passes data to another application. Open APIs refer to APIs that allow third party access to systems belonging to an organization. However, Open APIs for the banking industry do not necessarily mean that any third party can freely access a bank’s system without restriction, because banks still need to ensure adequate controls such as security and consumer protection.
The Framework takes a risk-based principle and a four-phase approach to implement various Open API functions, and recommends prevailing international technical standards to ensure fast adoption and security. It also lays out detailed expectations on how banks should onboard and maintain relationship with their partners including other banks (called Third Party Service Providers TSPs) in a manner that ensures consumer protection.
The Framework is intended to be high-level in order to allow banks the flexibility in implementing Open API as part of their strategy. In order to strike a balance between innovation and customer protection, it is preferred that TSPs offer solutions under a partnership arrangement with banks. Banks are therefore expected to adopt a formal TSP governance process. The HKMA believes that the Framework will serve as an important guide for the banking industry in Hong Kong to adopt APIs effectively and strike a good balance between innovation and risks.
Implementation in four stages
With release of the Framework, the HKMA expects banks to deploy Phase I Open APIs within 6 months and Phase II Open APIs within 12 to 15 months. Upon receiving the deployment roadmaps from banks, the HKMA plans to publish a summary of roadmaps of the Open API functions from the banks for reference by the market. The HKMA will work closely with the industry in the next 12 months on the deployment timeline for Phase III and IV Open APIs, taking into account implementation progress of Phase I and II, and international development. The HKMA will publish a timetable in due course.
The HKMA will closely monitor the Open API adoption progress, and looks forward to working with the industry and market participants to develop a healthy banking Open API ecosystem.
While promoting the wide adoption of Open API by the banking industry in Hong Kong, the HKMA launched Open API on its official website on July 23, 2018.
Around 130 sets of information covering all financial data and important information published on the HKMA’s website will be made available for Open API by phases. On July 23, 2018, 50 sets of financial data and important information will be opened via API. These cover the information most frequently accessed by the public, such as statistics on Hong Kong dollar exchange rates, interest rates, the banking sector and the Exchange Fund, as well as press releases and Coin Cart schedule.
The remaining 80 sets of information will be opened via API by phases for completion by mid-2019. With the launch of HKMA’s Open API, Stakeholders and members of the public can retrieve information and data from the HKMA’s website in a more convenient and efficient way for research purpose or for developing new applications.
Open API has the potential to be a key piece of support to move Hong Kong’s banking sector into the era of Smart Banking.
The HKMMA said that Open API is one small step for a bank, but a milestone for financial innovation in the banking sector. The HKMA hopes that the framework will provide specific guidance to enable collaboration between banks and TSPs, and ultimately bring new experience of innovative, convenient and safe banking services to customers.
The HKMA will monitor the progress of Open API implementation in Hong Kong and further consider the need for new regulatory measures if necessary.