Open finance represents a paradigm shift in financial services, unlocking the full potential of data sharing to empower individuals, SMEs, and entire communities. By extending secure API-based access from payments to every facet of financial life, it weaves together previously disconnected services into a coherent, inclusive ecosystem.
Understanding Open Finance: Beyond Banking
Open banking laid the foundation by enabling regulated data sharing from current accounts and payment services to licensed third parties. Open finance goes further, encompassing savings, credit, investments, pensions, insurance, payroll, utilities and more.
Through standardized APIs, consumers and SMEs can grant or revoke consent to data holders—banks, insurers, pension funds and billers—and to third-party providers (TPPs) such as fintechs. This avoids unsafe screen-scraping and enhances security.
full 360-degree view of finances becomes possible when all financial products and non-bank data are aggregated in one place. Combined with analytics, this enables a consumer-centric interoperable ecosystem where personalized advice and products flourish.
Connecting a Fragmented Ecosystem
Open finance acts as a bridge across multiple divides:
Bridging data silos. Historically, institutions guarded their own customer data. By linking disparate sources, account aggregation tools deliver unified dashboards for customers and providers alike.
Bridging consumers and new providers. Non-bank entities—insurers, asset managers or niche fintechs—gain fair access to data, fostering competition and tailored solutions, from gig-worker credit to migrant remittances.
Bridging formal and informal data. Alternative data sources, such as digital wallets, utility payments and payroll records, feed into credit models, unlocking services for those with thin credit histories or no traditional bank accounts.
Bridging short-term use and long-term resilience. Real-time insights and automated savings tools help users manage immediate cash flows while planning for pensions, investments and protection.
Pathways to Inclusive Growth
- Expanding access to financial services. Richer datasets support alternative credit scoring using transaction histories and bill payments, enabling micro-loans and remote KYC for underserved and unbanked populations.
- Improving affordability and competition. Information symmetry reduces risk for lenders, lowers interest rates, and promotes account-to-account payments that cut transaction costs and merchant fees.
- Supporting MSMEs and entrepreneurs. Traders and small businesses gain flexible financing—revenue-based loans, dynamic credit limits—and integrated dashboards combining bank, invoicing and payroll data.
- Enhancing financial health and literacy. Holistic dashboards, spending categorization and goal-based savings deliver holistic financial dashboards and tools that guide budgeting, debt management and investing.
- Reducing friction in payments. Real-time or near real-time payments minimize checkout delays, lower fraud risk, and improve conversion rates for merchants and satisfaction for consumers.
Stakeholder Benefits: A Win-Win Proposition
Open finance delivers tangible value across the ecosystem.
Consumers enjoy a unified view of accounts, loans, investments and insurance. They gain clear visualizations of debts and assets, real-time comparisons of products, personalized offers and the prospect of lower fees thanks to enhanced competition.
SMEs benefit from enriched cash-flow insights that improve creditworthiness assessments. Access to working capital becomes more agile, and borrowing costs can fall as lenders compete on real data instead of static financial statements.
Financial institutions and fintechs tap into broader, real-time customer data to innovate new products, fine-tune risk models, strengthen fraud prevention and deliver contextual experiences that deepen customer loyalty.
Risks and Safeguards: Balancing Innovation and Security
While bridges can be empowering, they also expand the attack surface. Data privacy and security are paramount to prevent unauthorized access, breaches and misuse.
Regulators and industry bodies must enforce strong authentication, encryption standards and robust consent management frameworks. Clear liability rules and transparent governance guard against negligence and ensure accountability.
To avoid exacerbating digital divides, stakeholders should invest in digital literacy initiatives and user-friendly interfaces so that underserved communities can harness the benefits of open finance without feeling overwhelmed.
Global Perspectives: Regional Progress and Examples
Different regions illustrate how open finance can build bridges tailored to local needs.
In the United Kingdom, PSD2 and the Open Banking Standards have enabled over 50 million account consents, powering competitive account aggregation and payment initiation services.
The European Union’s revised Payment Services Directive and forthcoming Data Act aim to extend these principles across savings, pensions and insurance markets, targeting a single digital finance market for 450 million citizens.
Australia’s Consumer Data Right, launched in 2019, has already facilitated over 6 million data sharing events in banking, energy and telecommunications, with plans to cover superannuation and insurance.
In Latin America, Mexico’s Fintech Law and Brazil’s open banking framework are fostering collaboration between traditional banks and fintechs, driving financial inclusion in regions where over 40% of adults were previously unbanked.
South Africa and Nigeria are piloting API-led data sharing models to broaden access for informal-sector workers, while India’s Account Aggregator ecosystem already connects nine financial data fiduciaries, promoting credit access for small businesses.
Charting the Future: Building Resilient Bridges
The promise of open finance lies in collaboration—between regulators, incumbents, fintechs and civil society. Success depends on harmonized standards, interoperable platforms and unwavering commitment to data protection.
By focusing on underserved populations, investing in digital skills and designing human-centric products, open finance can narrow the financial divide and drive sustainable, inclusive growth.
The bridges we build today will define tomorrow’s financial landscape. With the right policies, technologies and partnerships, we can ensure that everyone—regardless of income, geography or background—has access to the tools needed for financial well-being and opportunity.
