Open Finance promises to change the way consumers and businesses in Europe use financial services. But what does it mean for you?
What is Open Finance?
Open Finance is the next step in Open Banking. It allows you to share your data with trusted third-party providers, leading to three things. First, it gives you access to a wider range of financial products and services. Second, you have greater control over your data, and finally, it helps you manage your finances and make better financial decisions.
Here is how it happens. Trusted third parties access customer financial data from various sources, including savings and investments. This data is then used to provide better insights and bespoke products to customers. The data access is authorized, and only the owner of the data or a third party allowed by the owner can reach the data. Open Finance is also an ethical and transparent process and benefits all those involved.
Open Finance will cover not just payments and fintech players, but also banks and financial services companies. It will also cover all large and small businesses, and consumers.
Why Is It Relevant?
The payments landscape in Europe is booming. New tech and policies are coming in, and there is a stronger focus on data-driven innovation. In fact, Europe has embraced an open data ecosystem and is defining the value of Open Finance. Such is the pace, the European Commission is planning an Open Finance framework by mid-2022, with expected rollout by 2024.
Industry regulators like FCA and experts like KPMG present several benefits of Open Finance. For example, helping consumers to make more informed choices in their buying. Whether that be comparing product features and prices or deciding to switch a product or seller. It could also give better advice to customers and help them manage their finances better. This would improve customer experience and appetite for new products and services, leading to increased demand.
How Can Open Finance Support Businesses?
In several ways. With Open Finance, businesses will have better access to loans, credits, or other financial assistance. They can share real-time performance data with a trusted third-party and get real-time risk analysis.
Open Finance can help businesses to plan their finances better. It can help them avoid complex retail banking products and find simpler, smarter ways to become efficient.
A business can tap into a wealth of data and the right APIs to create bespoke solutions for customers. They must look into the question “what can be done with this data?” and use the insights to develop intuitive offerings. These value-added features can be embedded directly into their app or website.
Customers want smart insights that help them to manage their money better. Businesses can become trusted advisors to their customers using Open Finance. They can help customers better understand their financial habits and needs. And that would be great for customer loyalty.
Open finance has the potential to be a catalyst in the post-COVID economic recovery. Innovations will come up with new use cases. This will lead to healthy competition, the development of new services, and improved efficiencies. In all, a win-win for consumers as well as businesses.