Embracing Open Finance in Southeast Asia

Southeast Asia’s financial institutions are discovering new digital-first commercial models. Digitization is blurring the boundaries of finance and disrupting the core business model of banks. Open finance – as an extension of open banking permissioned data-sharing – allows for a wider range of financial products and services to be created. Banks are poised to take advantage of new banking and revenue models enabled by open finance.

This paper identifies the commercial opportunities for banks in open finance and explores how banks and other financial service providers can overcome challenges to open finance adoption. Open finance offers new growth and distribution opportunities for banks. With open finance, banks can tap into the massive digital finance opportunity, and find new ways to create value.

Banks are well-placed in their competitive advantage with regulatory barriers, customer data, brand value, and core IT infrastructure, and often a broad branch/agent distribution network. They can leverage their competitive advantage and partner with third party providers to expand access to underserved customers, provide new product and service offerings and deliver quality customer experience.

However, banks need to ensure that key questions around commercial viability are addressed by realigning operating models and organizational structures and advocating a bottom-up industry led open finance policy. Open finance regulations in ASEAN countries are nascent and evolving based on industry input, as more banks and financial technology companies see business opportunities in open finance products. Banks can start by articulating a clear business case for open finance, especially low-hanging fruits such as direct digital payments, digital onboarding, and identity. As banks explore new products and business models for open finance, they also need to ensure that their technology systems and operating models are adapted for digital readiness.

This paper will conclude with suggesting how banks in Southeast Asia can embrace open finance with practical next steps.