The Hong Kong Monetary Authority (HKMA) has recently (18 July 2018) released its final Open API Framework.

The formulation of the Open API Framework is one of the seven initiatives announced by the HKMA in September 2017 to facilitate the move into a new era of Smart Banking.

The framework sets out a phased approach to implementation, it currently covers “read-only” data such as product and service information, with plans to roll out API specifications facilitating access to payment initiation services (with the deadline for this roll out being decided in the next 12 months).

The framework also lays out detailed expectations on how banks should onboard and maintain relationships with new third-party service providers (TSPs).

The regime aims to boost competition within the financial sector with some differentiating factors from approaches taken in other regions globally, including these:

  • The adoption of the new framework is voluntary;
  • firms do not have to obtain authorisation from the HKMA to access banks’ APIs; and
  • banks themselves are tasked with vetting and monitoring TSPs.

Without a centralised body to vet third parties, banks will determine how they should individually assess and contract with TSPs, which makes negotiations more challenging, especially in establishing liability limits for data breaches and misuse. It also presents an additional compliance burden to the on-boarding phase and ongoing monitoring.

In May 2018, The HKMA published a revised Guideline on Authorization of Virtual Banks, read more about it in our recent blogpost.