It is hoped a more unified standard can help address current issues in regards to open banking, photo Le Toan

The Ministry of Information and Communications (MIC) last week reported receiving over almost 16,000 instances of internet fraud this year, over 90 per cent of them related to banking and financial scams.

Vietnamese banks are progressively adopting open API technology, an innovation pivotal to the fourth industrial revolution, enhancing their payment processing, electronic customer identification, and innovative financial product offerings.

Pham Tien Dung, Deputy Governor of the State Bank of Vietnam (SBV) told a seminar on the issue last week, “The essence of digital transformation in the banking sector lies in enabling customers to seamlessly access all banking services via their mobile phones. It’s fundamentally about connecting and integrating the various societal entities, organisations, and individuals.”

Illustrating the practical application of open API, Dung shared a personal experience.

“Living in an apartment complex, I was presented with two options to pay a service bill: either through the apartment’s app or via a bank transfer as instructed in an email,” he said. “This scenario highlights the fragmentation without open API and integration. Currently, a user may need to install numerous banking and service provider apps. With the design of open API and open banking, however, transactions can be seamlessly conducted on a single platform, and payments are consolidated and notified in one place.”

He noted the power industry’s five-year journey to consolidate data, allowing banks to integrate into their systems for streamlined bill payments, as a model of successful digital integration.

“Banks like VietinBank and BIDV are already pioneering with open APIs, facilitating partner connections and data exchange,” Dung added. “These moves present both a technological and regulatory frontier for Vietnam, mirroring global trends. The successful adoption of these frameworks is critical in enabling fintech innovation and meeting evolving customer needs.”

Having adopting open API since 2017, VietinBank deputy CEO Tran Cong Quynh Lan believed that the application of open banking helps create a robust ecosystem tailored to the evolving needs of its customers, broadening the array of services and products, and tapping into new customer bases.

“This innovation also allows third parties to develop new business models and services that enhance customer attraction and engagement,” Lan explained.

Despite these advancements, Dung of the SBV also pointed out a critical challenge: the isolated development of open API across individual banks, without a unified standard.

“The current landscape, where each bank develops its own open API, poses a complexity for fintechs. A centralised API hub could streamline this, allowing service providers to connect to a single point for comprehensive data integration across the banking network,” Dung said.

Highlighting the global context, he acknowledged that open banking and open API are nascent areas, both in technical and legal terms, worldwide.

“A successful legal framework for open API will empower the fintech community to provide innovative services, aligning with the evolving needs of customers and global banking service trends,” he said.

Likewise, Tran Quang Hung, deputy director of the Information Security Department under the MIC, also raised concerns about the potential vulnerabilities in open banking systems.

“With innovation comes the challenge of ensuring robust cybersecurity. The transition to open banking models must be balanced with stringent information security measures. The significant rise in cyber fraud cases within the banking and finance sector is a clear indicator of the threats that lie ahead,” he said.

The statistics presented by the MIC highlighted the pressing need for enhanced cybersecurity measures. In 2023 alone, online anti-fraud agencies blocked thousands of fraudulent websites and safeguarded millions of citizens from financial scams and privacy breaches.

“To fortify our digital defences, adherence to legal cybersecurity regulations and collaboration with various stakeholders is paramount,” Hung added.