This year has been named by Forbes as ‘the year of open APIs’. The implementation of open APIs in all sectors of the financial industry (FI) from banks to FinTechs has exploded around the world. FIs and governments are evaluating how open APIs can encourage industry openness and competitiveness, whilst simultaneously providing consumers with better user experiences.
The name of the game is Open Banking and the UK has been a leader in this expanding global movement: there are already over 22 jurisdictions across the world that have begun to consider, or have implemented their own Open Banking initiative.
Building on the Shoulders of Giants and Pushing Boundaries
Mexico is emerging as an open banking trendsetter. The country’s FinTech Law is providing an impetus for a national open banking regulation and is demonstrating considerable foresight in the open banking sphere. According to PwC and the Open Data Institute (ODI), the UK and Mexico are ranked number 1 and 4 respectively in the Global Open Banking league.
With the UK recognised as the global leader, Mexico is taking cues from its regulatory sandbox and data sharing model. The Latin American country’s innovative approach has a strong focus on cultivating an open banking standard that takes into consideration financial inclusion, creating and investing in products that benefit all citizens.
Image: Jorge Aguilar
As Mexico continues to prepare for an open banking standard, C Minds is playing a crucial role in educating Mexican stakeholders about the benefits of open banking. In a report commissioned by the British Embassy, C Minds, the Open Data Institute and the FinTech Hub identify use cases and offer recommendations for a successful Mexican open banking initiative. C Minds has launched a series discussing approaches to implementing new banking technologies in various jurisdictions.
How the UK’s and Mexico’s Open Banking Paths Have Diverged
C Minds details Mexico’s path to open banking and how the country can learn from the UK’s experience.
Open APIs and Third Party Providers (TPPs)
In the UK, TPPs have shown reluctance to adopt APIs, choosing to rely on data aggregation techniques. This is due to the restrictive nature of the UK’s Open Banking Standard, which only covers current accounts. TPPs, which need to access more information than just current account information, might not see the value in developing connections to APIs for just part of the information needed for their operation.
However, in Mexico, the scope of Open Banking standards will be much wider and will extend to all financial services. This means these specific challenges should not be encountered on this side of the Atlantic.
Moreover, it means Mexico will provide an interesting case study for jurisdictions seeking to go beyond the UK original standard, including for the UK itself if it seeks to grow the current scope. Australia will also be an interesting case study for governments that want to promote interoperability between different sectors, allowing for the data and API revolution to be integrated across the economy, providing overarching benefits to consumers.
Image: Aaron Barnaby
Scope of Legislation
In the UK, only banks associated with the Competition & Markets Authority (CMA9) are subject to PSD2 legislation. In contrast, Mexico’s open banking legislation will apply to all financial institutions, effectively expanding the country’s open banking standard to a level greater than is currently implemented in the UK.
This reach of financial institutions, combined with the scope of financial product and service information to be shared, will allow Mexican developers to work with a much wider range of data. This will effectively facilitate the creation of a broader set of new open-banking-powered solutions and services. A greater variety of financial services from an increased number of vendors will ultimately have a strong positive impact on financial inclusion, one of the main challenges faced by Mexico’s financial services ecosystem.
Understanding that innovation requires safe spaces to test new ideas, Mexico is working very closely with regulators to implement a regulatory sandbox.
Image: Ostap Senyuk
Whereas in the UK participants in the sandbox only work with the FCA, in Mexico, they would be working with the financial institution in charge of overseeing their activities (CNBV, Bank of Mexico, SHCP, CONDUSEF, CONSAR or CNSF). This will allow Mexican innovators to go beyond what has been developed in other places, thanks to the broad scope of data made available by the open banking standard.
The United Kingdom provides great lessons learned for Mexico and has enabled Mexico to build on the shoulder of giants to not only create its own standard but push boundaries. Mexico also looks forward to becoming a reference in Open Banking for the global south, leading the conversations on financial innovation for financial inclusion.
As an agency dedicated to accelerating Mexico’s social and economic development via the use of new technologies, C Minds is committed to making this a reality and represented Mexico at the world’s very first Open Banking Expo in London last November. Stay tuned to learn about Mexico’s progress in its Open Banking initiative.
About C Minds
We are an impact innovation agency with over 10 years of experience that designs and deploys strategies for economic and social development. We work mainly in emerging economies, enabling cross-sector collaborations and harnessing the power of disruptive technologies.
Our civic and social technology development lab allows us to develop Machine Learning, blockchain, Big Data and other new technology-based tools to support our groundbreaking initiatives.
We have offices in San Francisco (HQ) and Mexico City and partner-up with leading institutions around the world.
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