HKMA guidelines on smart banking to help Hong Kong bridge the gap on innovative services with other markets

Hong Kong Monetary Authority’s latest guidelines on open API framework for banking sector to help lenders develop various types of innovative and convenient services for customers

PUBLISHED : Monday, 13 August, 2018, 6:03am
UPDATED : Monday, 13 August, 2018, 6:03am

Hong Kong lags behind other developed markets in allowing banks to work with third party service providers to deliver a “smart banking experience” but the Hong Kong Monetary Authority’s latest guidelines may help the city to catch up, according to Citibank.

The HKMA last month unveiled a regulatory framework on how banks can use open application programming interface to develop various types of partnerships in the banking industry.

Open API technology enables third-party developers such as restaurants, retailers, e-commerce platforms and travel agencies to create fintech apps and services using bank data.

This was also one of seven measures announced by HKMA chief executive Norman Chan Tak-lam in September last year to encourage banks to develop financial technology.

“In the US, Singapore, Britain and other Western markets, many banks use open API making it simpler and cheaper for banks to team up with external partners to provide more efficient banking services to customers,” said Priscilla Ng, head of digital banking at Citibank Hong Kong.

“However, Hong Kong can catch up with the international trend quickly after the HKMA last month issued new guidelines on open API, which strongly encourages all banks to develop their fintech partnerships,” Ng said in an exclusive interview with the Post. “We are set to see a lot of banking API partnerships in the future.”

HKMA lays out guidelines to help banks in fintech push

The lender has previously launched its API developer portal in the US, Australia, and Singapore. Hong Kong was the fourth market where the bank made it available in March 2017.

In March this year, it formed its first API partnership with e-commerce shopping site HKTVmall, which was also the first commercial API use in Hong Kong.

“The major benefit of API partnership is its speed and flexibility,” Ng said. “We only spent 88 days to tie up the API partnership with HKTVmall. Previously, a partnership project like that would need nine months to a year,” she said.

In addition, Ng said the API developer portal allows the bank to develop tie-ups with multiple partners simultaneously.

The tie-up of HKTVmall with Citibank allows its credit card customers to use their reward points to settle their bills to shop on the e-commerce platform.

“We found that 50 per cent of Citi cardholders use reward points to offset their online purchases on HKTVmall. This shows Hong Kong customers are willing to accept this type of fintech partnership,” she said.

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Cross-selling is another advantage of such type of partnership. HKTVmall allow customers to apply for Citibank credit card through its website, which has resulted in a 20 per cent increase in new applications for the bank’s credit cards.

Citibank now has API partnerships with AIA Hong Kong, EGL Tours, Fortress, HKTVmall, Watsons, Octopus, Visa, Zurich Hong Kong and there are plans add more partners.

Other banks too have formed API partnerships. HSBC last month announced that its payment app PayMe had tied up with HKTVmall, while Bank of East Asia on Monday will introduce a payment portal for retailers.

Ng said there is no doubt innovation will increase competition, “but we believe competition will drive all of us to offer better banking services”.