Following in the footsteps of Open Banking, Open Finance has the potential to deliver the innovation benefits of data-sharing to the realms of consumer credit and investments, pensions, general insurance, and mortgages.
Crucially, it will enable the advantages of open APIs to proliferate beyond banks to mortgage lenders, financial advisers, investment managers, life insurers and an array of other FS firms.
As the industry awaits the FCA’s update following its recent ‘Call for Input’ on Open Finance, Capco’s new paper – Open Finance: Current State of Play & Lessons from Open Banking – discusses what the arrival of Open Finance will mean for both providers of financial services and customers.
Capco has identified five key benefits for customers in the utilisation of Open Finance services:
- More suitable products and services offered – improved data allows for bespoke and previously inaccessible products to become available
- Easy to compare and switch providers – automated switch and renewals, plus enhanced comparison tools
- Improved financial management – user dashboards and delivery of informed options
- Fair pricing and more financial inclusion – access to more offerings and competitive quotations
- Loyalty & rewards programmes – points collection systems and better incentives
Also uncovered in the paper are the ways FS providers can enhance their offerings:
- Deliver an improved personalized customer experience – streamlining and efficiency for users
- Increase customer account oversight – better understanding of financial circumstances and risk
- Improve service offerings – enhancing capabilities and innovation through competition
- Innovation and wider marketplace – fintech partnership opportunities and new market entrants
Isabella Hill, Consultant at Capco and author of the paper, said:
“The timelines for Open Finance should become clearer with the next FCA publication, however we envisage a phased approach. Companies should look at the lessons learned from Open Banking to prepare for Open Finance; investment in areas like API and data strategies will be key, as is defining digital business models.
“To succeed, firms will need to adopt a digital first mindset and have a clear scope to achieve the strategic objectives and priorities set out. Some may look to Australia, Brazil, the US, and Canada (Financial Data Exchange) to understand and learn from their Open Finance journeys.”