Open banking means the concept in which the third party financial institutions have access to financial and personal data of banks' customers and use this data to provide services. Currently, this data sharing takes place over the Application Programming Interface ("API") and can be done in three ways. These options are seen as; the data is publicly shared, the data is shared with stakeholders or the data is shared within the organization. API means the interface that enables data transfer to third parties between applications or within restrictions.1
Although open banking first started in the field of payment services, it now refers not only to the relationship between the parties in the payment world but also to a reshaped ecosystem. Open banking practices, which redefine the nature of the relationship between banks and their customers and further dynamize the relationship, also signals a new era in which all players in the financial services sector establish multilateral relationships among themselves.2 With the increase in the open banking trend in the world, legislators' interest in this field has increased and open banking regulations have begun to occur in different parts of the world and our country. In this article, we aim to provide an overview of open banking legislation.
II. OPEN BANKING APPLICATIONS AND REGULATIONS
a. Examples Around the World
One of the regulations that can be accepted as a cornerstone in the field of financial technologies stands out as the Payment Services Directive ("PSD") which was published by the European Union ("EU") in 2007 and started to be implemented in all member countries in 2009. PSD was followed by the second Payment Services Directive ("PSD2"), which was published in 2015 with a transition period of two years. Along with PSD2, which aims to turn the concept of open banking from being an initiative of the institutions within the EU borders into a status determined by laws, it has become obligatory for banks to share the financial data of the consented bank customers to other non-bank service providers.34
In the UK, which is one of the most advanced countries in the financial sector, in addition to PSD and PSD2, which started to be implemented during the country's EU membership period, 9 major banks in the country were made switch to open API structures by the UK Competition and Markets Authority ("CMA") which obliged them to establish the Open Banking Implementation Authority ("OBIE"). OBIE published the first open banking standard in January 2018, followed by the second standard in March of the same year. According to the data of OBIE, 118 organizations have obtained open banking licenses so far, and 200 companies are still in the application phase. As a result of all these developments, the number of transactions provided through open banking APIs in the UK has exceeded one million. On the other hand, Mexico has made it legal to share user data with open API structures among financial institutions with the law it adopted on 10 March 2018. The structures allowed by the law will be further elaborated and developed by the Central Bank and the Mexican National Banking and Securities Commission. In Switzerland, efforts are underway to prepare a general API standard for the entire banking system in the country.5
Open banking discussions in Australia began with the preparation of a national Consumer Data Law ("CDR"), announced by the Australian Federal Government. The banking sector will be the first sector to adopt CDR under the name of "open banking". In Asia, the Hong Kong Monetary Authority ("HKMA") published the Open API Framework in July 2018, which sets the regulatory framework for open banking. In the same direction, the Singapore Monetary Authority ("SMA") has issued advisory API Guidelines as part of open banking regulatory strategies.6
b. Current Situation in Turkey
In our country, compliance with PSD was ensured with the Law No. 6493 on "Payment and Securities Settlement Systems, Payment Services and Electronic Money Institutions" ("Law"), which came into force in 2013. Although it has brought quite important regulations in terms of the financial services sector in our country, it can be said that the Law is lacking in terms of open banking regulations. However, it is stated that currently 7 banks have opened their API portals Turkey and some banks have provided their APIs through technology companies.7
On the other hand, open banking is defined for the first time in Turkey with the "Regulation on Information Systems of Banks and Electronic Banking Services" ("Regulation") published on March 15, 2020, by the Banking Regulation and Supervision Agency ("BRSA"). The said Regulation is quite a big step towards the harmonization process with the PSD2 legislation in Turkey. However, although it is a big step, it cannot be said that every obligation introduced by PSD2 is included in the Regulation. While data sharing, which is one of the cornerstones of open banking, is a necessity for banks if the data owner has consented in PSD2, this element is not included in the Regulation. With the enforcement of the Regulation on July 1, 2020, there will be an opportunity to closely observe the effects of these new regulations on open banking practices.
It is observed that open banking practices, which radically change the relationship of customers with banking services and even increase financial inclusion, create a major change in the sector. It is possible to foresee that the open banking industry, which is developing and accelerating, will become more popular in the upcoming period. It can be said that the future of open banking, a rising trend in our country, will further clarify with the enforcement of the Regulation.
1. KAYMAK,O.: "Dijital Bankacilik Kapsaminda Türkiye'de Fintech Inovasyonu ve Uygulamasi: Rusya Sektör Karsilastirmasi" Istanbul Üniversitesi Sosyal Bilimler Enstitüsü Para, Sermaye Piyasalari Ve Finansal Kurumlar Bilim Dali Yüksek Lisans Tezi, Istanbul, 2019
2. FINTECH ISTANBUL: "Dünyada ve Türkiye'de Açik Bankacilik: Bankaciligin Gelecegi", Ekim 2019
3. FINTECH ISTANBUL: "Dünyada ve Türkiye'de Açik Bankacilik: Bankaciligin Gelecegi", Ekim 2019
4. KAYMAK,O.: "Dijital Bankacilik Kapsaminda Türkiye'de Fintech Inovasyonu ve Uygulamasi: Rusya Sektör Karsilastirmasi" Istanbul Üniversitesi Sosyal Bilimler Enstitüsü Para, Sermaye Piyasalari Ve Finansal Kurumlar Bilim Dali Yüksek Lisans Tezi, Istanbul, 2019
5. FINTECH ISTANBUL: "Dünyada ve Türkiye'de Açik Bankacilik: Bankaciligin Gelecegi", Ekim 2019
6. REMOLINA, N.: "Open Banking: Regulatory Challenges for a New Form of Financial Intermediation in a Data-Driven World" SMU Centre for AI & Data Governance Research Paper No. 2019/05
7. FINTECH ISTANBUL: "Dünyada ve Türkiye'de Açik Bankacilik: Bankaciligin Gelecegi", Ekim 2019
Originally published 15 June, 2020.
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