Building a better world through Open Finance relies on closer collaboration

We’re living in an era of crisis. 

The world is experiencing extreme geopolitical turmoil, soaring inflation, and continued post-pandemic supply chain problems. In the UK, we’re teetering on the brink of the first inflationary recession in 50 years and millions are facing the choice of heating or eating. The markets appear firmly in control of fiscal policy and stand ready to punish anything they deem as reckless government spending.

As we face these challenges, there’s a chance to reflect on how our sector can improve the financial health and resilience of the most vulnerable in society. We’ve seen a significant amount of progress made on financial inclusion, with The World Bank reporting the number of unbanked people dropped from 2.5 billion in 2011 to 1.4 billion last year. But much more can be done through the power of collaboration.

I was greatly encouraged to see Zopa and ClearScore teaming up in September to create the 2025 Fintech Pledge to tackle the spiralling cost of living. I’m sure Open Banking will play a part in helping the signatories to the pledge deliver against their targets. But the potential for Open Banking, and Open Finance, to drive financial inclusion is far greater than a single project. It can bring millions more people into the financial system and provide them with flexible products and services that meet their needs.

At Open Banking Excellence (OBE), we promote knowledge sharing, new thinking, and new partnerships across the growing financial services ecosystem. With this in mind, we held a recent Campfire, a virtual panel debate, on the role Open Finance can play in boosting financial inclusion. We were honoured to welcome Lord Chris Holmes as host. A passionate advocate for technology and the benefits of diversity and inclusion, Lord Holmes was joined by a panel of industry superstars who provided some great insights into this critical topic.

Opening the door to wider financial and digital inclusion

During the discussion, one point made by Lord Holmes hit me particularly hard. He said “We can’t consider ourselves a civilised society if we don’t fundamentally, thoroughly, and sustainably deal with financial exclusion and turn that into financial inclusion,”.

Financial inclusion is inextricably linked to digital inclusion. Mastercard has made a global commitment to bring one billion people into the digital economy by 2025, and the company’s Director of Public Policy for UK & Ireland, Pooja Bhachu, explained the role Open Banking plays.

“There are still 1.3 million unbanked people in the UK, but worryingly there are 11 million that are digitally excluded,” she said. “We can have really helpful innovation, but if you don’t help those people to have access to digital data devices then it’s redundant. You’ve then got to look at Open Banking through the data lens, accessing account information which can help people manage their money, budget better, and open up access to other credit lines.”

“When we think about inclusion, it’s also important to remember it’s not one homogenous group; there are different segments excluded. We’re working with fintechs that are drawing on Open Banking to develop products and services that account for sexual orientation, gender, age, ethnicity, and faith - Algbra, for example, which provides banking based on Islamic finance principles.”

Paul O’Sullivan, SVP Solution Engineering, Salesforce, also picked up on the theme of data and tech enablement, and how it can support people through life stages - starting young. “Data unlocks the potential of providing consumers with the critical information they need at the moments that matter,” he said. “One example is GoHenry. My son loves it. There’s elements of gamification, there’s education, and it’s task driven so he can actually save as he goes along.” 

Open Banking is boosting inclusion for businesses as well as consumers. “If I think with my Banking Competition Remedies hat on, the participants in those awards really understood, and spoke the language of financial wellbeing for SMEs,” explained Aidene Walsh, Interim Chair, Payment Systems Regulator (PSR). “Digital providers have now captured something like 10% of the SME market. They’re offering them marketplaces that really intervene in their financial wellbeing.”

Open Finance can further shift the dial - within the right regulatory framework

“We’ve built rails through Open Banking, and there’s a lot of possibilities to use them,” said Helene Oger-Zaher, Manager - Payments Policy, the Financial Conduct Authority (FCA). 

“I do think we need a regulatory framework in place, so we welcome the proposed Smart Data legislation making the rounds in Parliament. To get the right framework in place, we need all the different stakeholders to come round the table and think about the best way forward. This is why we’re holding sprints on Open Finance, to get us to that next level of thinking.”

“From a regulatory and policy perspective, it’s really important the financial regulators, like the PSR and the FCA, also think about how they can work with Ofcom to tackle that digital exclusion piece,” added Bhachu. 

The panellists were in agreement that Open Finance, if structured correctly, can be a real game changer amidst tough market conditions. “As we extend from Open Banking through to Open Finance, and even beyond that through to Open Data, we need to include the full range of financial products, such as savings and investment products,” said Janine Hirt, CEO, Innovate Finance. “Because ultimately that’s going to enable solutions that will give customers a full view of their total household finances and their major expenditures, and help unlock better solutions to help all of us through the cost of living crisis.”

“Data is going to lead the way, but I think we’ve a lot more to do in turning that data into actionable insights that matter for people,” said O’Sullivan. “You know, if someone is starting to slip into their overdraft, is there a better fit from a product perspective?”

Technology is so clever, but let’s not forget it’s people collaborating that will make Open Finance a success. In the words of Lord Holmes, “collaboration is the absolute reason for these Campfires, and collaboration - without question - is the most potent currency we have.” 

Along with our good friends at Innovate Finance, we’re starting to collate use cases and examples of best practice to inform and inspire the wider industry, and I would echo Janine Hirt’s call to action to the industry and the government - “Let’s get on with it.”