Friday | 10 January 2025 | Reg No- 06
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Friday | 10 January 2025 | Epaper
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Exclusive Interview

In open banking, a bank should securely share data of its clients with other banks upon their explicit request

Surjomukhi Ltd CEO tells

Published : Friday, 10 January, 2025 at 12:00 AM  Count : 246
Shamsul Huda
Fida Haq, Managing Director and Chief Executive Officer of Surjomukhi Ltd, a payment system operator licensed under Bangladesh Bank working on information technology has highlighted a crucial gap in Bangladesh's banking practices regarding customer data ownership and sharing.

Haq stressed that while customers own their financial data, banks in Bangladesh currently do not facilitate the sharing of this data with other financial institutions, even when requested by the clients themselves.

This practice, he argues, is a fundamental roadblock to customer empowerment and financial innovation, directly conflicting with the principles of open banking practiced in many countries worldwide.

He pointed out that under the concept of open banking, a bank should securely share a customer's data with other banks or financial institutions upon the client's explicit request.

This approach, widely followed in regions like the UK and Europe, ensures that customers can access better financial opportunities, such as competitive loan terms or tailored financial products, without being restricted to a single institution. In contrast, in Bangladesh, banks retain customer data exclusively, even though this data legally belongs to the client.

He explained that when a customer requests their current bank to share account details, transaction history, or credit information with another bank, the request is often declined.

This refusal undermines the customer's ability to leverage their financial profile for better services. Haq emphasized that banks should act as custodians of customer data, not gatekeepers, and must fulfill their clients' requests for data sharing securely and transparently.

This change, Haq noted, requires regulatory support from Bangladesh Bank, the country's central banking authority. By establishing policies mandating that banks share client data with other institutions upon request, the financial ecosystem could become more transparent and inclusive.

Such policies would allow real-time data sharing, fostering trust and enabling advanced financial practices like embedded lending, where loans are seamlessly integrated into digital platforms based on reliable customer data.

Haq argued that this system would also improve trustworthiness in financial transactions. Currently, customers resort to manually sharing their financial information with other institutions, which may not always be accepted or trusted.

If banks themselves were to share this data, with proper consent mechanisms in place, it would provide a verified and credible source of information for other institutions to assess creditworthiness or other financial parameters.

Furthermore, Haq emphasized the role of Application Programming Interfaces (APIs) in facilitating this transformation. APIs enable secured and efficient data sharing between banks and third-party institutions.

He urged Bangladesh Bank to introduce APIs to their Credit Information Bureau (CIB) platform, which would allow banks to share client data real time. Such integration could streamline processes like Credit Risk Management (CRM) and Know Your Customer (KYC) verifications.

Haq also touched upon the need for private credit bureaus to complement this framework. These bureaus, licensed by central banks in many countries, gather comprehensive data from multiple institutions, providing a holistic view of a customer's financial profile.
 
In Bangladesh, while guidelines for private credit bureaus exist, implementation remains limited. Haq believes that enabling customers to authorize these bureaus to access and share their financial data could further enhance transparency and convenience.

The broader impact of these changes, Haq noted, would be significant for financial inclusion. With millions of Bangladeshis unbanked or reliant solely on microfinance institutions (MFIs), open banking protocols could bridge this gap.

By empowering customers to share their financial data across institutions, the banking system could extend its reach to underserved populations, offering them access to more diverse and competitive financial services.

Haq's call for action underscores the urgent need for systemic reform. Banks must shift from being barriers to enablers of financial mobility, honoring clients' rights to data sharing.

Regulatory intervention, combined with technological advancements like APIs  and private credit bureaus, could position Bangladesh's banking sector on par with global standards, empowering customers and fostering innovation across the industry.



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