Regulatory Framework for Open Innovation – Proposed Rules and Guidelines for a New Regulation under the Amended Banking Act –

I. Introduction
On March 9, 2018, the Financial Services Agency of Japan (the ‘JFSA’) released details on its website of a proposed new regulation regarding FinTech companies providing electronic settlement and account information services for bank account holders. The JFSA is currently accepting public comments on its draft rules and guidelines and, following further revisions as necessary, the new regulation is scheduled to come into force on June 1, 2018.

This new regulation aims to enhance collaboration between banks and FinTech companies, thereby promoting open innovation that is expected to facilitate the development of useful services for bank account holders. Another important objective is to reduce the security risk by requiring FinTech companies to register and become subject to regulatory supervision, as well as encouraging banks to permit registered FinTech companies to access their online systems through Application Programming Interfaces (‘APIs’), without needing to use bank account holders’ secure information (i.e., ID and password). This article provides a high level summary of the proposed regulatory framework and sheds light on the current industry-based trends promoting open APIs.

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