The goals and vision for the financial services sector are ambitious. The use and uptake of Open Banking may still be in its infancy, but the destination of the policy has changed. The industry is now working towards Open Finance. Regardless of the approach – regulatory push or market incentives – the industry is undergoing a profound shift in strategy. Questions around the speed of the journey aside, the future of financial services is clearly more open.
Where are we going?
The Open Banking regulatory initiative in the UK was intended to introduce more competition into, firstly, retail banking, which remained stubbornly dominated by the 4 or 5 largest banks. The wave of new innovative technologies and falling costs were important enablers of new entrants to the financial services sector but that alone could not overcome the data hurdle. What the incumbent institutions had in droves (data), new providers could not recreate in short order. Running alongside the updated Payments Services Directive (PSD2), the approach was very much around levelling the playing field between the data ‘haves’ and ‘have nots’ whilst ensuring that consumers retained control over their data.
Open Banking (in the UK) limited in scope and reach in terms of the institution and data sets to which it applied, was an attempt to break down the data barriers through regulatory requirements that mandated data access and sharing.
In other parts of the world, regulatory initiatives have varied and, in the US, for example, it is the market and industry associations that are shifting the industry norms. In the absence of compulsion, there are any number of compelling reasons for established industries to become more open – faster innovation, overcoming the challenges of legacy, the demands of a more competitive industry, access to new partners etc. How to drive the agenda forward will be a key topic of conversation at FinTECHTalents Virtual Open Finance as we explore the paths to success, the barriers that remain and the new horizons open to the industry and beyond.
Are we there yet?
As noted, although the destination of policy has changed some of the groundwork is already in place. What is yet to be fully explored and understood is what will be possible in this evolving world of open-data sharing. Opening the full suite of financial data – pensions, insurance, wealth management is a game changer in terms of delivering value to customers. From new business models and ecosystems to the use cases that are, as yet, untapped, the opportunity needs to be explored, debated, and enabled.
There remains, understandably, the significant task of educating consumers and businesses as to the benefits and security of sharing their data. Whilst there may not ever be a need for end-users to fully understand what is under the hood, building trust and confidence in Open Banking/Finance is crucial to driving further adoption. During the event we will touch on those topics and dive deep into the need for education within established institutions as well. Open ecosystems need to be understood in order to be effectively leveraged and for many financial services providers they are still in the very early stages of adoption.
The protection of data looms large. We will also be looking at data protection and privacy and, no doubt, identifying where there is still work to be done in creating the rules and regulations to ensure that Open Finance is safe, secure and continues to build consumer trust whilst delivering the best possible outcomes.
How will we know where we arrive?
During our virtual tour of Open Finance and what it means for the future of financial services, we will be showcasing and facilitating lively conversations around the future shape of the industry. Who are the innovative providers of the tools and technologies that will offer the infrastructure to bring the vision and the art of the possible to life? Where are the opportunities for new partnerships and the creative ways that data can be used to deliver better outcomes to consumers? Expanding the horizon beyond financial services there are any number of compelling use cases to be explored and other industries whose own troves of data could expand those horizons even further.
When will we arrive at what is an ever changing destination?