“From Open Banking to Open Finance: what does the future hold?”
On March 21st, Mairead McGuinness, Commissioner for Financial services, financial stability and Capital Markets Union, delivered a keynote speech at the European Parliament, focusing on the move from Open Banking to Open Finance. Find below a recap of her speech, with some of the catchiest and most powerful sentences.
Commissioner McGuinness started her speech stating that “the Commission will adopt the proposal on Open Finance before the summer”, and that “essentially, this is all about data and information, because we know that data can give us great insights into so many things. This also means that there is a lot of potential for using this type of information in finance”.
According to her, we are also now starting to grasp the possibilities of data in financial services with Open Banking, and we are now looking towards this future of Open Finance.
Mairead McGuinness then shared several concrete Open Banking examples. “You can get an overview of all your different bank accounts, across different providers, in one single app. And that can make it easier to manage money and keep track of spending,” she highlighted.
She continued: “Another example is a service to help you manage subscriptions – letting you see everything you are subscribed to, and then to change or cancel them more easily”.
Essentially, to quote the Commissioner, Open Banking can be very useful to consumers, but also to companies that want to cover different kinds of financial services.
Yet, more than 5 years after PSD2 entered into force, Open Banking still hasn’t reached its potential. One of the reasons, according to her, is due to the fact that APIs – or how Open Banking services providers connect with banks – vary hugely in quality and functionality.
“Through our public consultations we gained a lot of insights into why we aren’t seeing that much data sharing in finance just yet. And potential customers have concerns around trust,” she added, before getting into more details:
- Privacy: consumers are wary of what a company might learn about them
- Security: they fear at the growing cyberattack risks
- Finally, consumers might ask themselves: “Will the company manage my data with my best interest in mind?”
Commissioner McGuinness then reassured the audience, highlighting that those concerns and challenges will be discussed as part of the revision of the Payment Services Directive: “We will propose measures aiming to fix these problems, without causing significant cost or disruption for those already engaged in Open Banking. And this revision will be accompanied by a proposal on Open Finance”.
Moving to Open Finance
As explained, Open Finance is about sharing a much broader range of data than just payment account data, with the consent and understanding of the customer. “The potential uses are many – depending on how far you want to go in opening up access to data. We are currently looking at what types of data would be most relevant and deliver the most value to customers. These include banking, investment, insurance and pension services,” she underlined.
On the notion of trust, the EC wants to put the customers in control of their data, and wants people to feel that they have control over their own information.
With Open Finance, we want to put customers in control of their data. We want people to feel that they have control over their own information
Mairead McGuinness
“To what extent should we standardize technical interfaces and how data is presented? We want to develop common standards for customer data and interfaces. And we want companies to work together, and work with us, as we develop them,” explained Commissioner McGuinness.
Finally, she highlighted that Open Finance is deeply related, and links, to other topics in finance and data, that are currently being discussed and developed by the Commission. For instance, “it would be a natural complement to the Retail Investment Strategy […] and it also links into the EU’s broader Data Strategy by ensuring a level playing field, no matter what sector. It would also find a natural complement in the Digital Markets Act”.
Source: European Commission
Photo by Christian Lue, on Unsplash