The recent publication of Open Banking Excellence’s ‘Open Finance Index’ reflects a trend to look beyond Open Banking (and payments in particular) to the wider advantages of Open Finance and Open Data. In fact, Open Finance predates Open Banking as a mandated change in the UK market. Screen scraping technology has long been used for bank account aggregation in the US, even if widely regarded as being less satisfactory than APIs for customer data sharing. An Open Finance platform like Moneyhub, which stemmed from holistic financial planning rather than just payments, has already put financial wellbeing-focused clients well ahead of traditional financial services peers.
Whilst many large UK financial institutions shun screen scraping, they don’t publish APIs of their own. Until required to do so, there is resistance to asymmetrical data sharing, with a belief that this would see shareholder value drain away to competitors. A lack of reciprocity in sharing data is in fact delaying the realisation of the benefits of Open or Smart Data, which have been outlined in the UK’s Industrial Strategy through to the FCA’s Open Finance consultation.
There are calls for financial institutions outside of the CMA9 to be made to do more on adopting standards and offering up what is after all the consumers’ data. The UK Data Protection and Digital Information Bill, now progressing through Parliament, offers a vehicle for more compulsion and paves the way for regulations impacting data access and governance beyond personal data – including requirements for “data holders” to make “customer data” and “business data” available to customers or third parties. Third parties may include competitors and non-financial organisations. This may be underpinned by a new Information Commission which will both police the market and have a remit to promote innovation (as the FCA does already).
But between myopic concerns over publishing APIs and waiting for Government-led enforcement, financial services firms have good reason to up their game on implementing Open Finance technology, and none more so than the Consumer Duty regulations coming into force this summer. Sadly, the FCA didn’t join up its consultation on Open Finance with the Consumer Duty rules but the focus on outcomes and concerns about affordability, suitability, vulnerability, and the avoidance of foreseeable harm almost demand an Open Finance platform solution. Whilst some firms are simply seeing this as a Compliance exercise and are dusting off the old Treating Customers Fairly playbooks, others are seeing that a revised data strategy based on insights and outcomes will be a powerful source of competitive advantage. Being relevant and useful to the customer, by leveraging data is how to win in an attention economy. Achieving customer primacy (being ‘above the API’ - or being the consumer of data rather than the consumed) certainly requires personalisation to stand out; immediacy to be prioritised and accompanied by interpretation - support and guidance to help customers make sense of and give context to data.
The twin forces of enlightened self-interest and legislation will inevitably bring increased reciprocity in data sharing. But firms shouldn’t see Open Finance as something new, futuristic, or discretionary to become involved in now. The genuinely smart players are already in dialogue with their customers and the customers of competitors and are raising the bar on Consumer Duty reporting. In being able to answer questions from regulators about evidencing good consumer outcomes, they are already using the technology available ahead of the reciprocity of data sharing being called for. Reciprocity is certainly required to advance the market, but firms can’t afford to let perfection be the enemy of progress.
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