Success of open finance could encourage customer empowerment and choice

Iota Kaousar Nassr

Senior Policy Advisor, OECD

Open finance is expected to stimulate competition by de-monopolising data and improving information availability, while also encouraging the emergence of cheaper and better financial products for consumers. 

While the gradual evolution of data-sharing frameworks is taking place at different paces, common themes appear between countries’ approaches and experiences, and common challenges remain to be addressed. 

Numerous benefits of open finance 

Common objectives include fostering innovation, encouraging competition and customer empowerment and choice. Client empowerment is indeed being sought, as financial services customers possess control of their data and decide on which data they wish to provide. In some countries, customers claim that such frameworks are helping them keep to budgets, reduce unnecessary expenditures, shop around and minimise fees and charges.  

Open finance could further contribute to the creation of new business models, to the servicing of previously underserved parts of the population and the offering of better customer experience and more — through closer cooperation between banks and fintechs or the emergence of new participants in the ecosystem. 

Risks will need to be accounted for and addressed
by policymakers to allow for the potential
benefits of open finance to materialise.

Risks and the role of policy 

Ensuing risks relate to inappropriate data usage and handling and other consumer risks; operational risks; threats to fair competition and even possible systemic implications for specific types of use cases.  

Risks will need to be accounted for and addressed by policymakers to allow for the potential benefits of open finance to materialise. As such, data-sharing frameworks will need to be built with safeguards in place to protect consumers, financial services providers and markets from such risks. 

Further discussion may be warranted on how access to financial customer data can be ensured responsibly and safely; how liability should be attributed and what other consumer safeguards need to be in place (eg. around consent); or whether there is a need to support the development of technical infrastructure that will promote data interoperability without undermining the technology-neutral approach to regulation that Organisation for Economic Cooperation and Development (OECD) economies endorse.  

Building trust in open finance ecosystems  

The success of open finance-type of frameworks will — to a large extent — depend on user uptake. This, in turn, will depend on the level of trust that consumers have in such frameworks, as well as on the usefulness of the products/services built based on data-sharing.