Gini, a Hong Kong-based fintech that got its start by aggregating consumer accounts for a personal finance app, has thrown in the towel on trying to connect to local banks via API.
“Sadly, despite this being our home, it is clear that the regulatory environment in Hong Kong has not evolved at the same speed as the other jurisdictions we operate in – and we can no longer commercially justify supporting Hong Kong banks for our app,” the company told its users in a statement on Friday, July 30.
It will stop supporting Hong Kong banks on its app, but will continue to support connectivity with banks in other jurisdictions.
Meanwhile, its newer B2B app to help small businesses manage their finances will continue to grow, both in Hong Kong and globally.
“I’m focused on the B2B side,” gini co-founder and CEO Ray Wyand told DigFin, noting the company recently secured a partnership with accounting software giant Xero, In the wake of COVID-19, smaller businesses have increased their demand for apps to help them forecast cashflow, manage their finances, and generate reports.
Waiting for takeoff
Beyond the particulars of one startup’s business decision, does this say anything about open banking in Hong Kong?
For customers, open financial data affords greater flexibility in how their money is managed, allowing, for instance, better visibility of accounts and more convenient access to payments, according to a new report by McKinsey & Co.
But the trend varies by market. In Europe, the U.K., Korea, Australia, and India, governments now require banks to open their stores of customer accounts to other companies. As a result, account-aggregator fintechs like Tink in Sweden have expanded from budgeting apps to mainstream financial apps (Tink was then acquired by Visa).
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In the U.S. and China, there is no such mandate, but the markets are big enough for some fintechs like Plaid to strike deals with consumer banks – making Plaid big enough to turn down Visa’s acquisition bid.
Singapore in December 2020 launched SGFinDex, a public-private platform to enable aggregated open financial data for consumers. Singapore does not have an open-banking mandate, but it has licensed Grab/Singtel and SEA to launch consumer digital banks, and SGFinDex provides the architecture to make API connectivity easy.
Hong Kong has little by comparison. The Hong Kong Monetary Authority has launched a four-stage open banking mandate but its initial stages haven’t required much. Instead HKMA has left it to banks to develop a baseline standard – an initiative that hasn’t gone far – and for fintechs to work out their own value propositions.
So far banks haven’t been very convinced of the need to share data. The European and U.K. regimes allow regulators to license third-party data providers, but in Hong Kong, banks would be on the hook for any data breaches. The lack of business cases and the threat liability means open banking for consumers is rare.
“Open banking here is driven by banks,” a Hong Kong-based consultant said. “It’s not like the U.K. or Australia, where banks are forced to open APIs. There’s no standardization, and it’s too costly for the banks to do. They just risk losing customers, unless the entire market is doing it.”
Some fintechs say they’re making progress. Planto.io, a more Hong Kong-focused account-aggregating fintech (it also operates in Taiwan), has built its own ecosystem. This allows it to bring new customers and market-validated technology to banks, making it a lead generator or a product partner, says co-founder Ankit Suri. He says the fintech is gaining traction among the territory’s new crop of virtual banks, which are already designed to operate within collaborative partnerships.
HKMA isn’t ignoring open banking, however. It’s just more interested in promoting it for SMEs, rather than for consumers.
One-way ticket, or round trip?
Last November, HKMA announced an initiative, the Commercial Data Interchange, an API network for banks and third parties to share SME information (based on the SME’s consent), after completing a proof-of-concept.
In July 2021, HKMA convened a symposium on CDI with representatives of more than 100 banks and money operators. This kicked off a new PoC, to focus on using commercial data to facilitate alternative credit scoring by banks.
HKMA says a pilot of CDI should launch before the end of the year, along with a facility to match potential data providers and data users.
“CDI is a brilliant idea,” gini’s Wyand said. “It’s a platform to give banks more data, not just take it from them. The HKMA has invested a lot on the analytics side. We will look to leverage this.”
Things might even change on the consumer side. HKMA does have an open-banking mandate which is now entering its final stages, which will require banks to make an investment into API connectivity. Incumbents have been alarmed by the ability of Hong Kong’s new virtual banks to acquire users – these may not be primary deposit accounts, but the nimble virtual banks are proving adept at providing products that consumers like. If incumbents are to keep up, they’ll need to build ecosystems of their own.
For gini’s business model, though, those changes are too far out to make commercial sense. “I hope I’m proved wrong,” Wyand said, adding the company would certainly reenter the Hong Kong consumer market if conditions change.
To remain now, though, would mean continually investing in outdated screen-scraping methodologies. The startup prefers to focus on adding banks in markets where APIs are available.
Giving up Hong Kong users does leave a hole, though.
“It’s been emotionally tough,” Wyand said. “We’re based here. It’s a popular app. But maintaining business in Hong Kong would mean maintaining a separate infrastructure.”
The fintech’s goal was to build a consumer app that it could export to the rest of the world, but it looks like it will have to build its business overseas and maybe import it back.