OPEN BANKING IN MONGOLIA
What is Open Banking?
2016 the Competition and Markets Authority report found that the competition between the older established banks and the newer, smaller ones was inequitable as smaller banks struggled to access the market and grow. Consequently, the customers had little choice and control over their money and financial information. Open Banking is a system that aims to resolve this. It provides third-party service providers (TPPs) access to financial data through Application Programming Interfaces(API) to make it easier for companies to offer different and innovative services.
How does Open Banking work?
Open Banking provides user-consented access using APIs to allow customers to move their bank account information from the bank to any third-party app or service with their consent. The regulated third party can use the customer's shared data to compare the customer's accounts and transaction history, aggregate data, create marketing profiles, make new transactions, make account changes, or access new products.
What are the benefits of Open Banking?
Open Banking brings broad benefits including,
Personalized and relevant product and service offers
Security and transparency with the use of data
Faster access to credit and financing
Control and improve personal finances
Get deals available with greater transparency
Concerns about Open Banking
Although it is beneficial for both customers and companies, it is worth mentioning that Open Banking faces a few challenges in getting accepted for daily usage.
The first one is a security risk and customer data privacy. Sharing data with third-party applications would make it hard for the bank to protect and control. World Economic Forum stated that the main reason consumers and businesses are reluctant to adopt Open Banking is the lack of trust in sharing their data.
Identity verification method. The developers should find a reliable method of identifying the person while getting the consent to share their data.
Lack of compliance standards. There are no technical or legal standards to follow while developing and operating an Open Banking system.
Global Open Banking
The open Banking market is growing rapidly while changing the use of banks and financial services. An Allied Market Research report in 2018 expected a 24.4% growth from 2019 to 2026 and predicted the market value would reach over $43 billion. The UK has been the Open Banking front runner with a 500% increase in Open Banking payments in 12 months at the end of 2021. Numerous other countries (USA, Canada, Australia, New Zealand, Mexico, India, South Korea, Hong Kong, etc.) are developing similar systems under different terminology.
Open Banking in Mongolia
In Mongolia, Golomt Bank announced that they were first introduced Open Banking in 2020. The bank is known for focusing on introducing innovative digital services. They started the research on Open Banking in 2019 and started the system experimentally in the next year. For now, the Open Banking system of Golomt Bank is working with Shoppy, Banana Mall, UBcab, Tapatrip, APU, Veritech ERP, CU convenience store, and E-Mongolia. "By sharing the innovative new solutions, we can further accelerate the digital transition" Most importantly, the customers win in any case and save time and money altogether," states M. Sainbileg the Director of technology and digital bank of Golomt Bank.