In an era of rapid technological advancement, financial innovations such as open finance are reshaping the financial sector, introducing the potential to expand access, usage, affordability and choice of financial services while presenting new risks.
Critical to open finance is the protected sharing of data to fintechs to derive increasingly personalised and diversified financial services. It builds on the global Open Banking phenomenon pioneered in the UK and EU. Therefore, the absence of a tailored regulatory framework for open finance introduces risks for financial institutions and their customers, who may not realise that their data is being accessed or the risks involved. At the same time, valuable data remains concentrated within large financial groups, inhibiting broader benefit.
Therefore, the FSCA’s Draft Position Paper on open finance aims for sustainable, inclusive and trusted innovation by: However, regulated open finance could break open data monopolies, allow new entrants to compete with incumbents, and tailor offerings to underserved groups, boosting inclusion.