March 8th marks International Women’s Day, a global celebration of the social, economic and cultural achievements of women worldwide. Thankfully, the gender imbalance that has blighted society for centuries is finally being eroded in industries as diverse as politics and sport. However, research from the World Bank finds that men still remain far more likely than women to have a bank account.
Globally, financial inclusion has risen to 3.8 billion people in recent years. Almost seven in ten (69%) adults now have a bank account, up from just 51% in 2011. However, while account ownership has surged, there remains large disparities between the sexes. In developing economies, the gap between men and women owning an account remains at a significant 9%.
There is no doubt that infrastructure improvements and the ubiquity of the smartphone has been a key driver to financial inclusion worldwide. And the positive impact of inclusion can’t be underestimated. As World Bank Group President Jim Yong Kim rightly says: "Financial inclusion allows people to save for family needs, borrow to support a business, or build a cushion against an emergency. Having access to financial services is a critical step towards reducing both poverty and inequality." However, the gender imbalance regarding financial inclusion remains troubling.
An issue of accessibility
While 69% of people now have an account, that still leaves 31% of the population being unbanked. That is 1.7 billion adults globally that don’t have bank accounts where they can save their hard-earned wages securely. Much of the problems with less developed countries are that of accessibility. It simply isn’t possible to build banks in certain locations. Yet, the advent of Open Banking has helped to rectify that.
Open Banking has enabled the leveraging of customer-permissioned data by banks with third party developers to build a new raft of applications and services that will benefit the consumer for years to come. By freeing the expansion of financial provision from the need to build physical infrastructure, Open Banking has knocked down the physical and technical barriers that has prevented the unbanked thus far from opening accounts. In these fractured times, it is very much a victory for collaboration.
The main catalyst for Open Banking has been technology. According to the World Bank, the number of people in Asia making digital transactions in the past few years has reached an astonishing 71%. In fact, 51% of mobile phones in circulation are Internet-enabled smartphones. By 2021, that figure will increase significantly to 62%.
With technology as its stimulus, Open Banking is opening up an ever-diverse range of financial services to a wider audience at a lower cost. It is helping to accelerate financial inclusion, increase commerce and broaden people’s range of economic opportunities in even the poorest areas.
Improving financial inclusion across APAC
According to the World Bank’s Global Findex database, a third of the world’s unbanked population live in just four Asia-Paciﬁc (APAC) countries – China, India, Pakistan and Indonesia. Yet, APAC has seen signiﬁcant recent innovations and developments in Open Banking that could lead to the number of its population that remains unbanked to decrease markedly over the coming years.
As a diverse and dynamic region, APAC has the potential to lead in Open Banking. In addition to the rapid uptake of new consumer technologies, the region has seen several widespread socioeconomic developments, such as mass-urbanization and a growing middle-class.
Singapore is one country in the region that has very much been an early adopter of Open Banking and is ranked ﬁrst in the 2018 Finastra Open Banking Readiness Index. In November 2016, the Monetary Authority of Singapore (MAS), was the ﬁrst regulator in the region to provide guidelines on Open Banking and to set out a framework. In general, the authorities have favored an organic approach. Many banks in the country have also partnered with Fintechs and payment companies to launch applications.
Similarly, in Hong Kong its Monetary Authority (HKMA) launched the Open API Framework in 2018 where banks were given the freedom to develop apps if they follow certain security standards. The HKMA hopes that this will boost innovation and the development of new collaborative API strategies across the various stakeholders.
Down under in Australia, Open Banking has been mandated through the implementation of the Consumer Data Right (CDR). Standardized APIs have allowed developers to design and implement apps that can interact with rival banks. What is most interesting is the one-year gap between the major and smaller banks having to comply with Open Banking that was put in to create a more level playing ﬁeld.
Open Banking is proving to be a facilitator for experimentation. Albeit, with a degree of caution. For it to fulfill its promise in rapidly scaling ﬁnancial inclusion, there is a need to build a robust infrastructure and ecosystem that enables interoperability and innovation. Unlike the regulator-led approach in the EU, three distinct models for regulator engagement have developed in APAC: prescriptive (regulator-led), facilitated, and market-led. There are, of course, beneﬁts and risks to all three, but it does have more chance to fail without interoperability being at the heart of any decision.
If this is adhered to, 2020 may well be the year that heralds in a new era across APAC. Open Banking is modernizing the payments ecosystem and knocking down traditional barriers to financial inclusion for men and women. It is proving to be a catalyst to a new wave of innovation across the sector. That can only lead to a more seamless and friction-free user experience for consumers.