OPEN BANKING
regulatory challenges, the technology is a stepping stone. However, for overall financial planning, a broader set of data is required, including mortgages, insurance and investments, to provide better services to customers. This leads open banking to extend to open finance and, thus, a set of services for the customer’s overall financial well-being. The real value of the data is derived from various datasets. Markets and customers are already experiencing new products and services for financial management through open banking. Open banking is regulatory-led in the EU, UK and Australia. However, there is no formal regulation in areas like the US or Canada, while Hong Kong and Singapore have worked through an open banking framework. Open finance needs further advancement, and the path is still unclear due to various regulatory and geopolitical situations and policies; regulators and policymakers are still working through the details. Below are some key areas that policymakers and regulators would need to consider:
1. Customer data and ownership rights are essential to open finance. There are different standards and regulations, for example GDPR (General Data Protection Regulation) in the EU, Consumer Data Right in Australia and Data Access Agreement in the US. 2. Interoperable, data-sharing standards and regulations are vital; for example, open banking is regulated in the UK/EU and consumer data rights are regulated in Australia. Similarly, regulations must be interoperable within and across different regions. 3. The existing financial services framework may need to be adapted for the adoption of open finance. Open finance concerns areas including investments, mortgages and pensions and regulatory changes and technical standards must be established in the relevant areas. 4. Open finance requires a clear risk and liability framework to safeguard customer interest. The standards set up by open banking could be further enhanced and adopted for open finance.
Open finance has a broad impact on various aspects of the financial engagement of a customer. Here, we discuss a few use cases. Open finance will significantly impact Know Your Customer
8 |
(KYC). With open finance, information could be shared among service providers for efficient KYC and onboarding. The overall financial management planning of a consumer can be optimised by integrating their savings, investments, wealth, pension and retirement fund. Benefit-based products like higher interest rates, predictive insights based on consumer behaviour and market performance can also be automated. It will be easier for lenders to offer better, more competitive products. In particular, lenders will gain 360-degree insight into a customer’s finances with their consent. Lenders will have complete visibility of credit agreements and arrangements, enabling them to provide dynamic solutions to meet customer requirements. SME finance is a significant challenge due to disparate data. Financial services will have a clear insight into invoices versus expenses and other data, enabling better credit line and finance options for SMEs. There are various benefits and challenges to implementing open finance and it takes a customer-centric approach. Regulators and financial institutions need to work together to define the open finance implementation roadmap through a public-private partnership. Open banking is paving the way for open finance. Consumers are experiencing the benefits of open banking in payments and account aggregation. And they could further benefit from investments, mortgages, insurance, and pensions if they are interconnected, API-driven, and supported by platforms and systems. With open finance, consumers will benefit from competitive services and will be able to manage their finances from a central place.
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46
