Open banking can be described as sharing customers' financial information with a third-party fintech company in order to offer customers a range of banking and financial services.
Open banking is carried out through API (Application Programming Interface) integrations. APIs provide access to the data that financial institutions allow to be accessed.
Through APIs, and with customer consent, fintechs access customers' banking and financial information and help them carry out their transactions securely and quickly.
Open banking makes it possible to offer customers the most suitable products and services, and to offer the highest quality service at a lower cost. In this way, banks enter into competition with fintech companies, which are third-party institutions outside the banking sector. The innovative and efficient solutions offered by fintech companies help financial institutions, especially those with large capital, reach their customers faster.
So where do we stand on open banking in Turkey?
Although open banking in Turkey has not yet reached the desired level, it is becoming increasingly widespread, and efforts are under way to offer customers a different banking and financial experience. We can already say that many initiatives and structures will emerge in this field in the coming days.
One of the biggest problems of today's banking system is that, although banks keep all of their customers' financial data, this data cannot be used sufficiently for the customer's benefit.
Customers want to see information about the bills they have paid, the loans they use and their details, and the credit cards they use and their details; to be able to apply to many banks with a single application; and to compare the services of all banks on a single screen or in a single app. Fundamentally, carrying out activities related to payment systems and offering customers the most suitable products and services for this system allows financial institutions to develop together with fintechs.
At the same time, customers want the flexibility to obtain a loan or a credit card from any bank with a single application. Open banking will play a very important role in making this demand a reality.
So what does the new regulation say about open banking?
The new regulation, published under the title “Regulation on Banks' Information Systems and Electronic Banking Services”, will enter into force on 1 July 2020. The first article of the published regulation defines its purpose as ‘to regulate the minimum procedures and principles to be taken as a basis in the management of the information systems used by banks in carrying out their activities, in the provision of electronic banking services and in the management of the related risks, as well as the information systems controls that must be established’.
The definitions section of the regulation also defines “Open Banking” as: “An electronic distribution channel through which customers or parties acting on behalf of customers can remotely access the financial services offered by the bank via methods such as APIs, web services and file transfer protocols, and can carry out banking transactions or give instructions to the bank to carry them out.”
This regulation is important because it lays the groundwork for open banking and mostly contains provisions on the requirements and limitations of technical systems. With this regulation, information systems have become more important within the banking and finance sector.
The full text of the new regulation published by the Banking Regulation and Supervision Agency (BRSA) can be accessed at the link below.
https://www.resmigazete.gov.tr/eskiler/2020/03/20200315-10.htm
