The Evolution from Open Banking to Open Finance

Bryn Coulthard is the Chief Product and Technology Officer at Smart Data Foundry, coming originally from a background in banking technology and product. The goal of the Smart Data Foundry is to safely unlock the power of financial data to provide huge benefits to society and inspire innovation by delivering economic, social and environmental benefits for everyone.​

As the UK’s journey progresses from Open Banking to Open Finance, Coulthard stands by the need for the development and evolution of standards. Whilst the UK mandated that providers deliver against API standards, Europe’s PSD2 approach decreed that banks needed to provide APIs but did not prescribe what these should look like. Today, as a result, we can see the level of adoption of Open Banking in the UK is much higher as opposed to Europe, due to the EU’s large array of differing standards. Such a myriad of standards means both fintechs and aggregators have to now build and develop complicated solutions to handle these multiple APIs. 

With ever-increasing complexity in the global Open Finance standards landscape, Smart Data Foundry maintains a Standards Library to help financial institutions and innovators quickly and easily assess technical standards adopted by a geography or financial system. “We look at Open Banking and Open Finance standards across the globe, and we maintain and update those standards as they evolve,” explains Coulthard. 

Coulthard is firmly of the view that standards need to be enhanced to be much more prescriptive about how APIs perform in terms of performance and availability. While in the past the UK was certainly a leader in this space, we’re now starting to see other countries learning from and building upon what’s been achieved in the UK. For example, Australia is more advanced in driving wider value through their core Consumer Data Right standards, Brazil has begun to really embrace Open Finance, and some Middle Eastern countries are beginning to push some quite strong Open Banking standards. “What we’re seeing internationally is that people have gone beyond the UK’s position and are now looking at ways to build on what we did and bring things to the next level. We need to learn from that as well,” he emphasises.

Coulthard strongly believes that Open Finance provides an opportunity to help people through their journey by demystifying finance so that people will make better informed decisions. It can help people retire, build new debt management, provide SMEs with better access to finance, or gig economy workers with savings or pensions programmes. “Open Banking has been around for the past six years, and it has been a real success. I just think it took time to get going,” he says. He warns against people getting too excited, however, about Open Banking or Open Finance as they are simply a means to an end. People should actually get excited about the value that increases the type of propositions and offerings.”

Opening Data Responsibly

Kent Mackenzie leads Deloitte’s Risk Analytics practice and has spent over 12 years in a range of financial services roles. With a passion for FinTech, data and advanced analytics, Kent has worked with local, national and international clients to develop tech and data solutions to manage financial crime, regulatory compliance, credit risk, and collections & recoveries.

“Data, quite frankly, should be considered as the lifeblood of any form of innovation and technological development,” says Mackenzie. “It’s very pertinent in our industry, financial services, that all products and advice for consumers require a hefty analysis of data; either on a personal level based on likes, preferences, hopes, dreams and desires, or with an overlay on those products of the broader population’s needs.”

In Mackenzie’s mind, having open access to data is what really helps innovation advance quickly, specifically in financial services, because it helps provide specific information on the types of products and services that can be offered. “If we can democratise data in this space, we can open up financial services to a variety of communities that perhaps haven’t in the past had the privilege of a financial product or service,” he explains. “It can help us to educate those that perhaps need a bit more help in understanding financial products.”

Before we get to this point, however, we need to rectify the opposing forces between the desire and ambition from organisations, regulators and innovators, to democratise data and create an open playing field, versus an anxiety around data privacy, respect of data and regulatory access to data. Mackenzie maintains that while we recognise the need to provide access, we need to do so respectfully and within the confines of respecting privacy, data integrity and bias. Over the past five years, he believes regulators within the UK have been doing a great job of opening up safe sandboxes, and credits the open data movements that have created anonymised data that is meaningful and can be accessed safely. He underscores that all this needs to be done in a non-competitive manner. “There’s a higher calling here to create these types of safe spaces to play,” says Mackenzie.

He believes the next incarnation of open data is eventually about providing a complete life-view of how one’s finances may be structured and how people could be guided and remain financially literate along their journey. This chain of events will prompt major innovations within the traditional financial services sphere. For example, real estate businesses can provide a number of add-on services around things such as affordability, insurance and tax standing.

The most important guiding principle of open finance, Mackenzie maintains, is the huge opportunity to level the playing field. “Fundamentally, financial services are a basic human right, and there are some staggering facts whereby large parts of the population do not have access to that basic human right,” he emphasises. “Also, I think that the ability to blend finance into our everyday lives is really exciting. It will create a really good opportunity to have financial services writ large.”