The UK's Financial Conduct Authority is to use its legislative powers to steer the evolution of Open banking to a broader model of Open Finance.
Open Finance refers to the extension of Open Banking-like data sharing to a wider range of financial products, such as savings, investments, pensions and insurance.
The FCA published a Call for Input in December 2019 on the shift to Open Finance, which could potentially offer significant benefits to consumers, including increased competition, improved advice and improved access to a wider and more innovative range of financial products and services.
The regulator believes it would also create or increase risks and raise new questions around data ethics and digital identity.
"Appropriate regulation will be essential to managing those risks and giving consumers the confidence to use Open Finance services," states the body.
Feedback from 169 market participants indicates that Open Finance could be a significant undertaking for firms given the change in operating environment as a result of Covid-19 and its ongoing impact.
There is a degree of consensus around the key building blocks needed, including a legislative and regulatory framework, common standards and an implementation entity. The aim would be to give consumers and business greater control of the data which they choose to share with third party providers.
The FCA believes there is a strong incentive for firms, TPPs and their representatives to work together on common standards that could support Open Finance. As a first step, the watchdog is encouraging industry to identify a minimal set of data that could be shared on a ‘read’ API basis.
This would help inform assumptions on the feasibility, scope and cost of future legislation.
"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," states the FCA. "We will also continue to encourage Open Finance and digital identity propositions to apply for our sandbox and direct support."