Untitled

• Interbank Account Data Sharing (IADS) is a HKMA initiative
• IADS allows secure and efficient sharing of bank account data with customer consent
• Announced in 2023, with a pilot program starting January 1, 2024
• IADS is part of the "Open Application Programming Interface (API) for the Banking Sector"
• Launched by the HKMA in September 2017
• IADS is designed to transition Hong Kong into a Smart Banking era

General Principles of IADS

• Digitize banking operations
• Improve risk management
• Enhance customer experience through open data access among participating banks

Key Ecosystem Players

• Regulatory Authority (HKMA): primary regulatory body establishing guidelines and standards
• Data Holders and Data User - Participating Banks: mandated by the HKMA to join the IADS initiative
• Customers: possess authority to consent to data sharing for participating banks

Other Ecosystem Participants

• Hong Kong Science & Technology Parks (HKSTP): offers value-added services for Hong Kong's tech sector and manages the "IADS Developer Platform"
• Fintechs & Technology Providers: collaborate with banks to build IADS infrastructure
• Fintech providers include Jetco and Planto

Core Principles of IADS

• Data Ownership: customers own and can choose to share their financial data
• Transparency: clear information about data sharing practices
• Security: implementing robust measures to protect customer security
• Interoperability: ensuring smooth communication across bank systems
• Innovation: fostering a competitive environment
• Customer-Centricity: prioritizing customer needs

IADS Consent Process

• Customer starts the process via the Data Consuming Bank's platform like online or mobile banking
• The platform redirects the customer to the Data Providing Bank's platform.
• Customer logs into the Data Providing Bank, reviews, and confirms consent
• A process must be repeated to grant consent to multiple Data Providing Banks

Customer Consent

• Customers can view and revoke consents via the internet or mobile banking

Process Illustration

• User selects accounts, consents, repeat for banks as Data provider
• Bank A requests data from selected banks
• Selected banks provide data to bank A consolidates, enriches and generates insights from the data for different use cases

Importance of IADS

• It is important to banking professionals due to its potential to transform the industry
• Democratizes data, revolutionizes operating models, enhances customer service, improves fraud detection, and generates new revenue streams
• According to a 2024 HSBC survey, 56% are likely to consent to banks accessing data and 86% are willing to improve balance consolidation and faster credit card and loan applications
• As of 2024 Q4, over 70% of participating banks have or will launch an IADS use case

Impact on Banking Professionals

• Senior Management: sets digital strategies
• Business Units: understands customers across banks for personalized services and products
• Operations Teams: conducts KYC and streamlines overall processes
• Technology Departments: develops and train AI models

Other Effects of IADS

• It can disrupt the banking industry by leveling the playing field
• IADS promotes democracy of customer data driving innovation, AI apps, competition etc

History of IADS

• IADS is under the HKMA's "Open Application Programming Interface (API) for the Banking Sector"
• API is a way to facilitate information exchange between computer systems
• Open APIs allow third-party access to systems
• The HKMA published the "Open API Framework for the Hong Kong Banking Sector"
• Framework has a risk-based principle and a four-phase approach of Open API implementation

The Four Phases of Open API

• Phase I (by end of January 2019): Focus on Product and service information such as read-only information offered by banks on details of their products and services
• Phase II (by end of October 2019): Emphasis on Subscription and new applications for product/service, customer acquisition process such as allowing online submissions/application of financial products
• Phase III (Related to IADS): Focused on Account information such as Account balance, credit card outstanding balance, transaction records, credit limit, change and others
• Phase IV: Focused on transactions such as payments and transfers Initial set of API functions includes deposit account information and online merchant payments and are gradually implemented Over 90% of banks achieved full implementation Phase 3 currently being launched

Framework

• The scope includes:
• Open API functions and deployment timeframe.
• Open API technical standards on architecture, security and data.
• TSP governance model.
• Open API facilitation measures.
• Open API ongoing development

Phase III Banking Open API Standards

• Facilitated by Hong Kong Association of Banks (HKAB) released on December 14, 2021
• Covered technical and user experience standards

Technical Standards

• Design and development of APIs including the functional and technical process flows
• ReSTful framework, URI structure, HTTP header, response code, payload structure, pagination, versioning and API fair usage policy
• Aims to support implementation of APIs which supports availability and management

User Experience

• Focuses on covering standards to govern and enhance the processes
• Implementation is intended to apply to banking

Technical Standards

• Focuses on design and support
• Aims to enable secure exchanges of data covering certificates, transport-layer security, OAuth 2.0, OpenID Connect, two-factor authentication (2FA), cyber and anti-fraud security

Other Standards

• Operations Standards: supports the implementation of APIs
• Includes the availability, performance testing, problem and change-management support procedures.
• These standards are for informational purposes and provides guidelines to Open API design

Current Status of IADS

• Data covered includes Corporate/SME/Retail deposit account information
• Data can be shared between banks
• Interbank customer-consented data sharing from one participating bank to other participating banks facilitated and communicated
• 28 banks are mandated to join

IADS Participating Banks

• Airstar Bank Limited, CMB Wing Lung Bank Limited, Mox Bank Limited, Ant Bank (Hong Kong) Limited, Nanyang Commercial Bank Limited, Bank of China (Hong Kong) Limited, OCBC Bank (Hong Kong) Limited, Bank of Communications (Hong Kong) Limited, PAO Bank Limited

Second Tier IADS Participating Banks

• The Bank of East Asia, Limited, Public Bank (Hong Kong) Limited. China CITIC Bank International, Limited, Shanghai Commercial Bank Limited, China Construction Bank (Asia) Corporation Limited, Standard Chartered Bank (Hong Kong) Limited, and others below:
• Chiyu Banking Corporation Limited, WeLab Bank Limited, Chong Hing Bank Limited, Livi Bank Limited, Citibank (Hong Kong) Limited, Dab Sing Bank Limited, DBS Bank (Hong Kong) Limited, Fubon Bank (Hong Kong) Limited, and Fusion Bank Limited,

Data Involved

• Account Availability
• Account Status
• Balance and transaction records including amount and time
• Account Details

Data Exchange

• Data exchange reflects the information presented on the customer's internet and mobile banking platforms
• The exchange occurs without incurring any additional costs for each API call made

Digital Banking Platforms

• Customers can choose which accounts to share
• Customers can selected how long the accounts should be shared for
• Customers can manage their consents any time

Participating Banks

• Must share customer details

HKMA and IADS

• The HKMA hosted the "IADS Showroom Day" on October 23, 2024
• The purpose was to give opportunity for participating banks to share pilot program results

IADS Pilot includes:

• Consolidated financial analysis
• Streamlining Loan Application Processes
• Online Identity verification

IADS Data (Launched and planned)

• Most is for retail customers which includes account consolidation, accounts and wealth -82% is for account consolidations for retail customers
• Most of the minority is used for customers which encompasses everything 4% streamline identity verifications while the remaining 53% streamlines loan applications

HKMA Partnership

• The project aims offer testing account data and simulated APIs from participating banks
• This encourages banking collaboration
• Data access provides production type access data.
• Fintech companies use partnered banks to develop tools and infrastructure such as Open APIs.
• Citibank and Shanghai Commercial Bank use collaborated Planto on lending use cases

Lending

• Traditionally retail applicants fill forms along with salary proof
• SME’s have an even more time consuming process.
• Banks depend on customer information, credit history from TransUnion
• Traditional leads to updated data - SMEs are vulnerable to it.
• Fraud and Documentation is at risk
• Banks average the 3-5 weeks to complete.
• Risk monitoring procedures require interviews and site visits

Generational Gaps

• Generational have varying practices and tech usage - lack credit history
• Banks may default or deny to worthy applicants

IADS enhancements:

• Customers share data securely via APIs with lenders, making it faster and more secure
• IADS assists the accessibility of clients for approval
• Banks access real time data, which verifies and reduced fraudulent applications.

Lending Banks

• Banks have been launching retail and loan applications
• ZA bank implementation removes users for providing income info, resulting in quick and remote approval.
• Approvals can be tested within 3 minutes

Lending Numbers

• Shanghai has shared half a million while Hang Seng bank makes around 60 million in SME loans

Financial Management

• There are low level engagements - as banking only offers checking and payments transaction
• Budgeting tool, savings and spending tracking were not accessible.
• Clients that had bad digital experiences needed alternate ways to manage their finances.
• SME business tool data are often scattered.

EY report

• 36% of SME's move to financial service to service their businesses,
• 65% would search functions for accounting and transformation.

What banking challenges does IADS address?

• Digital CFO such as cash flow management, expense tracking and invoicing
• Management assists the insight into customers personal financial management
• Recommendations provide an insight into planning for an easier experience.

Bank Retail Management

• Hong Kong banks have plans to launch banking accounts during the next year
• 360 Wealthy management plans aim to accommodate accounts across expenses as well.

SME Plans

• Major banks are including the planning of digital banking accounts.
• Major brands will release their accounting, and reporting reports.
• These implementations support easy operations

KYC - "Know Your Customer"

Banks have to follow due diligence that must

• Customer identity and reliability must be verified.
• Reasonable measures must be implemented to protect the business owners identity

KYC Business

• These processes can take weeks, as banks need to gather more information on the identity

How IADS Benefits KYC

• Real time banking allows customers to check the details, with third parties conducting.
• This expedites the verification of information.
• This verifies customer services and other banks to simplify processes

Global Expansion Open Banking and Open Finance

• Different approaches
• Can be categorized in three main areas
• Open Banking where sharing of data with customers and 3rd parties. And can include payments
• Open finance provides insight with data from all banks
• Investments etc

Open API Countries

• UK, EU, Brazil
• Utilities, Loans, pension etc

Globalization

• 60 jurisdictions use banking and banking regulations, where as 16 use some Finance
• Australian Regions at the forefront
• Aims to maximize financial data for innovation, AI and value

Open Banking Variances

• Market strategies - differences are financial models, and level of digital readiness All jurisdictions require
• Customer data, regulatory authorities

Rules and Implementations

• Regulations are set by standards where the use of data can be used across banks and their customer data The jurisdictions can provide strict practices but without implementation.

Global Data

• Regulations are proven to show great coverage in many categories, payment insurances and pensions. A positive impact can have data sharing

Organization Overview

• Data over market regulation is at an organization low with 54/28.
• Low standards show an increase
• EU and UK data are used across organizations
• It is possible to use strict standards to complete requirements

Potential Impact on Al in Banking

• Al is revolutionizes There are support pillars that provide, training methods and design structures Computational requires storage The financial and technical aspects will benefit the training of all aspects of all industries - making all elements good. The biggest issue lies with the training in all companies.

Customer Information

• A major challenge is a better flow and system
• The limited ability to gain information is why AI has limited success on the financial end.
• Limited accuracy and predictive data
  • According to Gartner, the data AI projects can be improved by 85%. These AI implementations have allowed for building, training and improving all data systems. Those implementation gives consistent and interoperability and foundation to data development.

Gen "AI"

• Recently some AI have gained popularity
• These AI generate new content, audio, text etc
• Major brands have started using these techniques to grow and expand automation

Fintech

• Fintech banks will be pushing for customer-centric models.
• Provides recommendations.

Financial

• New processing, and data security - Hong Kong still lags on AI.
  • There is hope that there will be more personalization for the future.

Future IADS Trends

• The first implementation will be testing the pilot to grow the banking sector.
• Increasing Participation: Expanding the number of banks.
• Broadening Data Scope: Adding more accounts and data types - such as credit cards, loans, and investments.

Personal trends

Deepening tools with financial management will improve relationships,

• Management can improve the use for better and informed decision making.

Banking Implementation Trends/Rules

• The addition of business, marketing and support
• The addition in funding and government assistance

Global Improvements

• Utilization in credit lending can evaluate the customers financial risks

• Loan can be improved and have low interest rates.

  • Going above and beyond recommendations

• SGFinder and Singapore and AI will help customer gaps.

• There will be 80% more savings with time and less risk.

Payments Management

• Using IADS data will give insight with payments long side invoice management, reconciliation.
• All global banks will be using API's to support their treasury to new corporate accounts.