BANKS are increasingly using application programming interfaces (APIs) to share data with third-party providers. But as more and more data are shared – and in the light of the recent Facebook/Cambridge Analytica scandal which saw the social media platform expose the personal data of 87 million users – it raises the question of whether banking customers know what data their banks are sharing with third-parties.

Through the use of APIs banks now have the capacity to directly connect and share data with third-parties such as mobile wallet providers and e-commerce companies, making it more convenient for customers to interact with these third-party providers.

Growing connectivity to third-parties, however, should raise questions for banking customers. First, they need to know what information will or could be shared. Second, they should have an understanding of how their information is handled outside the bank’s infrastructure.

“Because of the whole concept of opening banking, we will be onboarding a lot more of these third-party vendors,” explains Angel Ng, country business manager, Hong Kong, at Citibank Global Consumer Banking. “There is a suite of protocols that we need to follow in terms of the risk assessment for onboarding third-parties.”

Citi has established a partnership with HKTVmall in Hong Kong to allow the bank’s credit card holders to use reward points to make purchases online. According to Ng, the bank only uses three APIs to connect with the HKTVmall platform: for reward balance, for redemption information, and to allow for payment with points.

The concept of open banking and use of APIs are both encouraged by financial regulators. The Second Payment Services Directive (PSD2) in the European Union put into effect earlier this year now allows customer data (given customer consent) to be shared with third-party payment service providers, in an attempt to allow these companies to enter the payments market.

In Asia, the Hong Kong Monetary Authority (HKMA) is currently evaluating industry feedback on how to approach the use of APIs within banking. “By formulating an Open API framework, we aim to facilitate the development and wider adoption of Open APIs by the banking sector, thereby maintaining its competitiveness and improving financial services for better consumer experience through collaboration between banks and tech firms,” states Howard Lee, deputy chief executive of the HKMA.

The greater integration of financial data is good news for insurance company Ping An, and other companies like it. “Data is the centre of everything we do,” shares Jonathan Larsen, group chief innovation officer at Ping An. With customer data financial institutions are able to craft services and products that are best suited to customers’ particular needs.

Consumers are split when it comes to sharing data with banks. Less than a quarter of respondents from developed Asian markets said they were willing to share data, according to McKinsey Asia’s Personal Financial Services Survey. In contrast, 62% of emerging Asia participants indicated a willingness to share their data for customized services.

While the proliferation of APIs is at an early stage, it appears that the type of information shared by banks – which are already heavily regulated – mostly serves the practical purpose of facilitating services, such as payments and e-wallets, by connecting with third-party providers. Although that certainly contains risk, users can perhaps sleep easier knowing the intent is of a different nature to the mass gathering of data relating to political preferences and browsing behaviour for the purposes of political influence, as in the case of Facebook and Cambridge Analytica.