By: Nick Raper, Head of UK, Nuapay
As the next step in the open banking journey, open finance has the power to enable businesses and consumers to gain access to a wider range of more competitive financial products/services, and through improved transparency and portability of financial data, empower them to make better financial decisions.
For open finance to succeed though, it is critical that banks and other financial service providers safeguard customer privacy when sharing data. The imperative here is to make sure that data is only shared with clear consent from consumers and, most importantly, these consents need to be flexible and in plain English. I liken this to the implementation of GDPR, where technology services were required to make it clear to customers what data was being tracked through cookies. Already, we are beginning to see that the cookie consents have become long and complex. Many customers fail to read or understand their options, and when left with a choice to “Agree” or “Go Back” so simply click to “Agree and proceed”. For open finance to succeed, we need to do better. Providers need to ensure that consents are clear and simple to understand, and can be tracked by consumers. They also need to provide flexibility, so that consumers can opt out of sharing non-critical data at their own discretion.
It has also been said that open finance could risk shifting power from banks to tech giants, due to the inherent use of big data within open finance. There is a lot of potential value (for both consumers and the tech giants alike) in platforms that aggregate consumer financial information, and direct customers to the best services by enabling the seamless sharing and porting of their information. The risk for consumers though is that the tech giants use their power inappropriately, against the best interests of consumers. We need to ensure that, where tech giants are playing advisory roles and brokering financial services, they are appropriately managed within the FCA regulatory regime, including most importantly ensuring tech giants meet obligations to treat customers fairly and to provide appropriate transparency on any kickbacks and commissions. The tech giants can use the data for good or for evil. If they choose the evil path, this would be a massive risk for the tech giants themselves, with potential to lead to a future scandal – they need only be reminded of the PPI mis-selling scandal which cost UK banks billions.
For many years, consumers on the border of the financial system have been treated unfairly, with poor access to products, and unfair and even predatory pricing. For example, WorldBank research has revealed that there are around 1.7 billion adults globally who are without access to a bank account. We see open finance as an opportunity to bring greater financial inclusion into the marketplace, especially after the pandemic has caused financial stress for a significant proportion of the population.