As the journey to digital transformation continues post-lockdown, it is crucial that financial services are secure and accessible to all. This is where Open Banking comes into play.
The United Kingdom has been one of the leading countries in the implementation of Open Banking which is a secure way to give financial services providers access to financial information. It has enabled the development of a vibrant ecosystem, with 226 third party providers and around three million active users among individuals and small and medium businesses.
Although Open Banking has yet to deliver fully on some of its promises, it has the potential to provide big gains for customers. Research indicates consumers could gain £12 billion a year thanks to its services, with businesses achieving a further £6 billion in value. To reach those targets, however, we need to go further and investigate the best way to extend the scope of Open Banking.
Going beyond Open Banking
The value of Open Banking comes from putting customers in control of their data and enabling them to share that data. The more data they decide to share, the better the services customers will receive.
However, the financial requirements of individuals and businesses go far beyond payment accounts data, which has been the focus so far in the United Kingdom and the European Union.
The value of Open Banking comes from putting customers in control of their data and enabling them to share that data.
There is a logical pathway from Open Banking to open finance that would lead to greater customer engagement. Open finance would extend open banking principles to give consumers and businesses more control over their financial data about savings, mortgages, investments and pensions.
This evolution would enable the ecosystem, from fintechs to banks and insurance providers, to fulfil the promise of Open Banking by developing even more innovative products and services for all customers.
An instrument for financial inclusion
Broadening the scope of Open Banking would also lead to greater financial inclusion.
We have seen an increased use of digital finance over the last 16 months and as digital transformation is progressively embraced by businesses and individuals, we must not allow parts of the community to be financially excluded.
Extending the scope of Open Banking could boost products and services aimed at addressing financial exclusion and allow everyone to have access to key financial services that will allow them to benefit in their day-to-day life.