Open Finance

Open finance involves extending open banking-like data sharing and third-party access to a wider range of financial sectors and products

Open Finance is the extension of Open Banking to other financial products, such as savings, mortgages, consumer credit, investments and insurance. Being so closely related allows Open Finance, more than other Smart Data schemes, to benefit the most from the technical, operational, and user experience foundations laid in the development of Open Banking.

As consumer awareness in Open Banking increases, so too will trust and adoption of Open Finance, and conditions will be good for collaborative endeavours. However, the barrier to entry is still relatively high for smaller organisations, which may in fact have the most innovative ideas. Larger organisations, on the other hand, may well be better positioned to take advantage of the possibilities of Open Finance, but are cautious due to existing sector regulation and lack of clarity about the benefits of such schemes. The development of Open Finance must take this into account with appropriate support and incentives, and it may be that the sector will require a similar mandate to Open Banking to achieve its purpose.

The finance data spectrum shows the potential range of openness in this sector, from closed data about account passwords, through different types of shared data including savings account transaction history, to openly published data about financial product information.

The FCA has committed to work closely with BEIS and HMT to form a view of what work is needed to inform judgments on the feasibility, timing and design of any future legislation relating to Open Finance. It has also committed to support industry schemes that are already underway as well as new ones, which is part of a phased and proportionate approach to these initiatives. The FCA recently published a Feedback Statement to their Call for Input on Open Finance.

Using out example from Open Banking, we can see how the data ecosystem around a banking customer expands with the evolution into Open Finance, creating additional services from the data accessed from investments, insurance and pensions providers.

The Open Finance data ecosystem is an extension of the Open Banking data ecosystem into additional financial services

To further improve this emerging area, innovation programmes like the Digital sandbox pilot: FCA DataSprint should be encouraged, to help facilitate open innovation and reduce barriers to access high quality data. Data availability mechanisms should be built into the design and functioning of all such sandboxes as an enduring regulatory principle. With funding to both scope and incubate new businesses to improve data access, for smaller organisations in particular, Open Finance would be given the best chance to flourish. The potential benefits are numerous, both for consumers and for the industry itself.

Other sector-wide innovation programmes are underway to support the rollout of Open Finance as well. Specifically, the Open Savings, Investments and Pensions (OSIP) programme by The Investing and Saving Alliance (TISA) aims to create a set of API standards for savings, investment and pensions products for Open Banking-styled data sharing. These standards are also being supported by the OSIP Sandbox and a a voluntary governance framework.