Open finance has the potential to greatly benefit consumers, but raises questions of data ethics, according to industry stakeholders surveyed by the City regulator.
The Financial Conduct Authority (FCA) published a feedback statement today on its call for input on open finance. The term refers to the extension of open banking-like data sharing to a wider range of financial products, such as savings, investments, pensions and insurance.
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The FCA’s call for input launched in December 2019 and closed in October 2020, having received 169 responses from industry stakeholders regarding their views on open finance.
Responses showed that open finance can increase access to a wider range of more individually tailored products, empower consumers and businesses to make more informed financial decisions and make it easier for consumers and businesses to compare price and product features and switch easier.
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Industry stakeholders also said in their responses that open finance could help widen access to advice and support in decision making, support greater personal financial management and improve competition among financial services providers, spurring innovation, development of new services and increased demand.
However, respondents warned that open finance would also create or increase risks, raise new questions of data ethics, could require significant work for firms to introduce and an appropriate regulatory framework will be essential for open finance to develop successfully.
The responses to the call for input said that a legislative and regulatory framework, common standards and an implementation entity are needed for open finance to develop in the interests of consumers.
Almost everyone agreed that third party providers should be authorised and held to appropriate threshold conditions on financial resources, appropriate systems and controls, operational resilience requirements and security architecture. They said this would be to protect consumers and help build confidence on open finance.
Several trade body respondents recommended that the FCA work with government on a review to establish any gaps and ensure that they are filled with appropriate legislation.
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“We will continue to work with the government to support the design of future Smart Data legislation and support industry-led efforts to develop common standards and roadmaps to open finance,” the FCA said.
“We will also continue to encourage open finance and digital identity propositions to apply for our sandbox and direct support.”