Credit information and open banking

The rapid growth of fintech and digital lending services has significantly improved the accessibility, convenience, and speed of financial services. However, it has also increased the risk of multiple borrowing, whereby a single borrower obtains credit from several lenders simultaneously, leading to rising debt burdens and financial vulnerability.

Under the macroprudential policy framework, measures have been implemented to impose limits on the debt-to-income ratio and curb consumer credit growth. Nevertheless, the expansion of app-based digital lending has increased borrowers' ability to obtain loans from multiple sources within a brief period. Consequently, the need to consolidate credit information in a timely manner and effectively monitor borrowers' total outstanding debt, financial obligations, and debt burdens has become increasingly important.

However, the current frequency of credit information reporting, the scope of data coverage, and limitations in interoperability between systems constrain the ability to consolidate borrowers' total debt obligations and income information in real time, calculate debt-to-income ratios, and continuously monitor changes in debt burden. Addressing these gaps is a key prerequisite for strengthening the foundations of a framework that can identify excessive indebtedness at an early stage and mitigate potential risks to financial stability.

Establishing such a foundation requires a comprehensive modernization of the legal and infrastructure framework for credit information. Since the Law on Credit Information was enacted in 2011, significant changes have occurred in financial markets, technology, the structure of credit information services, and international regulatory standards, while the legal framework has not been updated accordingly. In 2021, the Bank of Mongolia licensed private credit information service providers, creating a two-tier system based on both public and private sector participation. In parallel, technical upgrades are being implemented in phases to migrate credit information reporting to an updated protocol, laying the groundwork for improved data standardization and interoperability between systems. Despite this progress, further reforms are needed to align the system with international good practices, particularly in the areas of data quality, data governance, privacy protection, consumer rights, dispute resolution mechanisms, the use of credit scoring, and the alignment of responsibilities between public and private credit information service providers.

A further priority is to enhance the accessibility and utilization of financial information by studying an open banking framework based on the secure, standardized sharing of financial data with the consent of customers, and by preparing for its introduction. Accordingly, preparatory work will be undertaken during 2027–2028, followed by phased implementation over the medium term during 2029–2030. At the same time, the rapid expansion of fintech and digital lending services is creating a growing need for a regulatory and supervisory framework that addresses data security, algorithmic transparency, consumer protection, and clearly defined accountability for both data providers and service providers, while reflecting the specific characteristics of technology-driven financial services.

In conclusion, it is necessary to improve, in a coordinated manner, the legal framework for credit information, information infrastructure, system interoperability, the open banking data exchange environment, and the regulatory and supervisory frameworks for fintech and digital lending services. Together, these reforms will establish the foundation for an early warning framework capable of determining borrowers' total indebtedness, financial obligations, and income in real time, and monitoring changes in debt burdens through debt-to-income ratios and other risk indicators.

Furthermore, the recommendations of the International Monetary Fund's (IMF) 2026 Article IV Consultation and the World Bank's 2026 Mongolia Economic Update: Maintaining Stability and Resilience emphasized the need to strengthen financial sector resilience, improve the credit information system, enhance risk-based supervision, improve regulatory coordination between banks and non-bank financial institutions, and refine debt-to-income-related regulations. These recommendations further reinforce the need for the reforms outlined above.

The Bank of Mongolia's Medium-Term Strategy (2026–2030) sets out measures to enhance the credit information system, establish the foundations for Open Banking infrastructure, and strengthen the regulatory framework for fintech-based lending, consumer data protection, and accountability in support of financial stability. These measures include:

• Developing a revised draft of the Law on Credit Information and submitting it to the legislative initiator.
• Developing methodologies, aligned with international standards, for calculating each borrower's income and debt-to-income ratio using credit scoring and government data exchange systems.
• Establishing the foundations for API-based Open Banking infrastructure and implementing it in phases.
• Strengthening the regulatory framework for fintech-based lending, consumer data protection, and accountability mechanisms.

• Modernization of the Credit Information Database: The technological infrastructure, information standards, data quality, and coverage of the credit information database will be enhanced to support the calculation of debt-to-income ratios based on borrowers' total debt obligations and income information, help limit over-indebtedness, and improve the capacity to receive, process, and update information in real time. In addition, the supervisory framework applicable to credit information service providers and data providers will be strengthened. The measures include:
• Preparing the revised draft of the Law on Credit Information, its underlying policy concept, and the required impact assessments; obtaining feedback from relevant institutions and stakeholders; finalizing the drafts; and submitting them to the legislative initiator.
• Developing proposals for amendments to related laws to ensure consistency with the revised Law on Credit Information and coherence across the legal framework.
• Defining detailed supervisory criteria, methodologies, and frequencies for credit information service providers, and strengthening the risk-based supervision framework.
• Clarifying the obligations and responsibilities of data providers, including reporting deadlines and data quality and integrity requirements, and strengthening the mechanisms for addressing violations.
• Gradually modernizing credit information transmission in line with contemporary data exchange requirements, and enhancing the technical standards governing data receipt, validation, processing, storage, and updating.
• Expanding the coverage of credit information, ensuring the system readiness and technical compliance of data providers, and monitoring the implementation of real-time information sharing.
• Establishing technical connectivity with government data exchange systems and the systems of information custodians and implementing the requirements for obtaining borrowers' income information and calculating total debt obligations and debt-to-income ratios.
• Establishing baseline requirements, the scope of data, and assessment criteria for credit scoring, together with the related legal framework, so that information on borrowers' total debt obligations, debt burden, repayment history, and repayment capacity can be used in credit risk assessment.
• Improving the requirements governing the use of credit information, data updates, consumer rights, and complaint and dispute resolution processes related to credit information, and monitoring their implementation.
• Open Banking ecosystem: Preparatory work will be undertaken to assess the feasibility and requirements of introducing an API-based open banking framework. Such a framework would enable consumers to securely share their financial information with fintech companies and other financial institutions, and would facilitate the collection, processing, and exchange of financial-sector data within a unified environment. The measures include:
• Studying legal and regulatory options for defining open banking activities, the rights and obligations of participants, consent-based information sharing, and data privacy and security requirements.
• Assessing technical standards and protocol options for information exchange based on open APIs and preparing for interoperability among financial institutions' systems.
• Examining mechanisms that enable consumers to grant and revoke consent for sharing their financial information with third parties, and for monitoring the use of shared data.
• Regulation of fintech and digital lending: Regulations governing prudential requirements, data security, and algorithmic transparency for technology-based (fintech) lending will be developed in line with international standards to prevent the emergence of unregulated shadow lending. The measures include:
• Establishing prudential requirements and assessment criteria for evaluating borrowers' total debt obligations, income, repayment capacity, and debt-to-income ratios in fintech and technology-based digital lending and monitoring multiple borrowing risks using real-time credit information.
• Strengthening requirements on algorithmic transparency, decision-making criteria, data security, and consumer data protection in digital lending in accordance with international best practices.
• Defining requirements for credit information reporting, data quality, and update frequency applicable to fintech and digital lending service providers, while promoting the effective use of credit database information in lending decisions and risk assessment.

Improvements in credit information quality, coverage, timeliness, and real-time data exchange capabilities will enable accurate and timely determination of each borrower's total outstanding debt, financial obligations, and income. This will facilitate early detection and monitoring of debt-to-income ratios, debt burdens, and multiple-borrowing risks.

Building on this, credit scoring and credit information-based risk assessment methodologies will become more sophisticated, allowing for more accurate evaluation of borrowers' repayment capacity and risk profiles while supporting broader access to financial services.

Implementation of regulations governing fintech-based lending, including appropriate prudential ratios, data security, and algorithmic transparency, will improve the effectiveness of supervision over digital lending and reduce risks arising from inadequately regulated lending.

Clarifying the requirements and feasibility of introducing Open Banking and completing the necessary preparatory work will lay the groundwork for consumers to access, manage, and securely share their financial information with their consent. This may expand consumer choice, promote fair technology-driven competition in the financial market, and create conditions conducive to lower lending interest rates and service fees.

Ultimately, the regulatory and supervisory framework for fintech and digital lending services will be strengthened, consumer rights will be better protected, and data privacy and security will be enhanced, creating conditions that support the stable and sustainable development of the financial sector.