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Embrace Open Finance Or Get Left Behind – Study

Tom Burroughes Group Editor 9 October 2024

Embrace Open Finance Or Get Left Behind – Study

Open finance enables access and sharing of consumer data to even more financial products and services, covering everything from loans to pensions, linking financial data with non-financial sectors, such as healthcare and government. A new report maps the territory, and points to what's at stake.

The open banking market is on track to reach $123.7 billion in size by 2031 from $13.9 billion in 2020, revolutionising the financial industry, according to a new report.

Open finance will herald a revolution so profound that industry players will be compelled to reshape their business models, the 48-page study, prepared by PwC Luxembourg and commissioned by Luxembourg for Finance, says. 

“We are truly at the genesis of a revolution, and open finance will unlock significant opportunities for innovation, enhanced customer experiences and competitive advantages,” it says. 

Open finance enables access and sharing of consumer data to even more financial products and services – not just banking, as in the case of open banking. The OF term covers loans, consumer credit, investments, and pensions. It also enables wider integration of financial data with non-financial industries, such as healthcare and government.

While open finance is not a typical offering from private banking, and more of a retail/mass-affluent phenomenon, the changes wrought are likely to affect firms catering to high net worth and ultra-HNW individuals.

A brief outline:


Source: PWC, Luxembourg For Finance

Firms in the space – there appear to be hundreds worldwide – include Finerio Connect (Mexico); Liquid Token (Japan); Upswing (India); Yapily (UK); Lina Open (Brazil), Polymarket (US); Brankas (Indonesia); Okra (Nigeria); Akahu (New Zealand); truID (South Africa); Moneyhub (UK); and LawFi (US), according to the Venture Radar website. 

Regulatory patchwork
The report notes that regulators in places such as Hong Kong, Singapore, Saudi Arabia, Australia, Brazil, India, the European Union, the UK and South Korea are drafting, or have set up, rules enabling open finance to develop. 

A big driver of open finance is the rise of a more digitally savvy population: Generation Z, for example, is far more comfortable with such technology than older peers.

What it means
The PwC/Luxembourg report says that open finance data sharing will provide clients with a unified view of investments across multiple advisors and asset managers. It also says that “one-stop shops” will offer real-time, optimised asset allocation and enhanced transparency, driving industry consolidation and eliminating firms that don’t adapt. The report says OF will force change in the way retail funds are distributed: asset and wealth management products and services will be integrated into the interfaces of third-party providers via APIs (application programming interfaces).

APIs are key to expanding data sharing, the report says, with the number of “calls” – requests for data exchange – between financial institutions projected to grow from 102 billion in 2023 to 580 billion by 2027, representing a compound annual growth rate of more than 54 per cent.

“The financial sector is yet again undergoing a fundamental transformation, and this time, it is the transition from open banking to open finance. With this transition, the fragmented age of financial services is entering its twilight – one that should be fully realised by the end of this decade. In its place, a new era is emerging,” it says. 

“In the banking industry, data monetisation will become a significant revenue stream for financial institutions that hold customer data and, with client consent, provide it to third parties,” it says. 

“Open finance will create holistic advice and management solutions. In the AWM industry, data sharing through open finance will allow industry players to provide clients with an overall view of their investments, even if these are with different advisors and include products from various asset managers,” it says.

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