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Future of Finance Q2 2023

How open banking transforms into open finance — and smart data

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Cyber internet security system
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Henk Van Hulle

CEO, Open Banking Limited (OBL)

Open banking is fast evolving into open finance and will eventually become ‘open everything.’ We explore some of the products and sectors that will benefit.

Since open banking technology was launched, it has transformed the way 7 million consumers and businesses in the UK are able to pay for goods and services, manage their finances and benefit from cost-effective credit by allowing them to share their financial data with third parties.

Open banking to open finance

Money management apps give consumers a clear picture of their spending, helping them to budget better and find deals, while savings apps have helped people build regular savings habits, boosting their financial resilience.

For businesses, real-time insights into their finances — often powered by open banking-enabled accounts software — enable accurate forecasts of their cash flow, offering a way to tackle late payments and make cost savings.

As open banking morphs into open finance, eventually becoming smart data (‘open everything’), we look at pioneering products making their way to market and predict which other sectors may be set for a similar transformation.

Open finance could simplify mortgages

A leading UK building society announced that it would incorporate open banking-driven affordability checks into its mortgage assessments. By linking borrowers’ current account payments to their credit score, additional evidence of a good financial track record — such as regular council tax payments and subscriptions to entertainment services — can be factored into mortgage approvals.

Money management apps give consumers
a clear picture of their spending.

Open finance has the potential to disrupt the mortgage market further, for example, by connecting a buyer’s bank data to digital — and traditional — brokers to provide a comprehensive overview of mortgage products tailored to their financial needs, potentially in minutes. This could also be linked to online advice, given in near real-time, guiding buyers step-by-step through the approval process.

Open everything: smart data

With open finance picking up pace, we are also on the path to ‘open everything.’ This will be supported by the introduction of new smart data legislation. By harnessing the same data-sharing principles of open banking, the aim is to help consumers and businesses find cost-effective tariffs for essential utilities such as energy, water and broadband, potentially saving hundreds of pounds.

It will also help to address the loyalty penalty — the difference between what loyal and new consumers pay for an identical service — which costs households around £1,100 a year on their mobile tariffs, mortgages and broadband.

‘Open everything’ will help consumers and businesses navigate complicated markets, receive more accurate and personalised financial advice — and save time and money. We call that a truly connected digital economy.

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