The UK’s Financial Conduct Authority (FCA) published a call for input regarding the development of Open Finance. Said to be an extension of Open Banking, Open Finance would open up a wider range of financial products and services to the transformative impact of third party data sharing.
In this article, we get to grips with the what, why and how behind Open Finance. Learn what Open Finance could mean for you from both a consumer and business perspective.
What is Open Finance?
In simple terms, Open Finance is the next step in the Open Banking journey.
Financial data such as mortgages, savings, pensions, insurance and consumer credit – basically your entire financial footprint – could be opened up to trusted third party APIs if you agree. Open Banking already allows regulated websites and apps to access transaction data from bank accounts and payment services so that you can ‘move, manage and make more of your money’ (openbanking.org.uk).
Why Open Finance?
The FCA outlines their vision of Open Finance for consumers and businesses as follows:
- To gain access to a wider range of financial products/services
- To have greater control over their data
- To engage with their finances and empower better financial decisions
The end goal is improved financial health driven by market innovation and competition.
Once rolled out, Open Finance will for example, allow for the development of financial dashboards, bringing together customer data such as investments, savings and cash flow all in one place.
By sharing financial data with trusted third parties, customers could be offered tailored products and services that represent a better deal.
Automated switching and renewals combined with advice and financial support services are also high up on the Open Finance agenda along with accurate creditworthiness assessments.
How will Open Finance affect me?
The personal and business implications of adopting an open approach to finance are many.
Access to cheaper and more holistic debt advice; product recommendations and increased engagement with your financial situation are just three ways in which personal finance management platforms (PFM) could evolve. But Open Finance doesn’t stop at recommendations and dashboards, or “read” permissions. Open Finance could also have “write” permissions, executing cost savings on your behalf. For example, moving that extra £100 into a savings account or mortgage overpayment.
The FCA is clear in their call for input that they ‘consider open finance to have the potential to transform the way financial services work for consumers and business.’ The time is now to prepare for Open Finance.
Managing Finances with FastPay
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