FCA Says Open Finance Will Boost Financial Awareness

Published / Last Updated on 18/11/2019

The Director of Competition at the Financial Conduct Authority (FCA), Sheldon Mills delivered a speech this week at The Investments and Savings Alliance (TISA) Open Finance Conference in London.

Open Finance is an area of significant interest to the FCA and his speech highlighted the opportunities it will provide businesses, consumers and the regulator.

Open Finance is an opportunity to build on the conceptual framework of Open Banking, it allows small and medium sized enterprises (SMEs) and consumers to access and share their data with 3rd party providers, they can then use that data to develop innovative products and services to meet their needs today and in the future.

  • Open Finance has the potential to improve access within Financial Services and could change the nature of competition substantively
  • Open Finance is part of a data-sharing initiative it will need consistency and co-ordination across all sectors.
  • Open Finance needs to develop in a competitive environment delivering good outcomes for consumers and have the right incentives for all players to participate.

Solutions avaialble like data portability and Digital ID, Open Finance realises these benefits and has the potential to improve the way consumers and (SMEs) manage their finances, also improving the way firms interact with their consumers and each other.  Open Finance will also transform the face of competition in financial services. 

Open Finance may un-lock and offer new ways to use pre-existing tools and change the consumer experience, it could also see previously excluded but creditworthy consumers gain access to cheaper credit and interact with other financial services sectors.

A package that can work in the interest of the consumer giving them access to advice, easily change products, find information on their spending habits and have full control and responsibility.  Financial Advice will be especially important when consumers have more responsibly for their own finances.

Open Finance want SME’s to benefit, allowing them to access improved integration of payment, accounting and lending platforms for internal management which could lead to a greater cash flow control.  They could also compare the products and services available to them from a range of providers.

Some of the challenges Open Finance must consider are consumer protection and ‘Fairness in Price Discrimination’

  • Consumers will have access to make switching and enrolment decisions this potentially could cause frictions between switching processes.
  • It is also crucial that data is held securely and used in an ethical manner. 
  • Increased sharing carries more risks of scams and fraud

Consumers should be able to see where their data is and who is sharing their data.  They should be able to easily remove their consent anytime.

Challenges firms could face:

  • Cost of Infrastructure
  • Competition between firms

Open Finance need to ensure consent management tools are applied across all sectors and Open Banking demonstrated a practical solution in how data should be securely shared with 3rd parties, and firms and 3rd party developers having a clear framework to develop applications.  Including stronger payment safety across all sectors to make sure data is protected against fraud.

Open Finance with the help of the FCA has the benefit of balancing consumer protection, market integrity and competition over the financial services sector. 

Comment

This is exactly what we will hope to deliver and benefit from with our Robo Adviser currently in development.

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