What is open finance and how does it differ from open banking?

When it comes to consumer-permissioned data, it’s a distinction without a difference. Today, we are facing a complete digital transformation that is completely changing the financial market. The pandemic accelerated this process, and we’ve taken important steps towards a financial revolution. They allow the right party to access the right data at the right time. But APIs need common standards, not all of which are outlined in the regulations so far. The ability for data to flow between customers, banks, and third parties represents a paradigm shift in the world of finance.

What is open finance

With the open banking regulation in place, customers believe access to their personal banking information will provide a seamless user experience. Open Finance is also where the potential for building truly innovative financial services becomes a reality, as it offers the chance to create completely new business models that leverage previously unexplored sources of data. PlatformOur platform Connect to your users’ accounts, understand financial data, and move money through open finance.


Users will gain better lending options, more control over their spending, budgeting and investments and faster payment flows in retail settings. As the potential of open finance continues to evolve, companies will be able to help to set up investment and savings plans for customers as well. For example, when making a purchase, companies could designate that a certain amount of money is sent automatically to an investment or savings account. Industry members, regulators and other stakeholders must weigh in if we are to achieve a truly open, inclusive and sustainable ecosystem.

What is open finance

Technology providers, such as Open Finance API platforms, will help build the necessary infrastructures to make it a reality, facilitating a smooth transition to this new scenario. One of the first examples of Open Banking implementation took place in the UK in 2016. Back then, the Competition and Markets Authority issued a rule that required the nine biggest banks in the country to allow licensed startups direct access to their data. They decided to do this following a report which found that older, larger banks didn’t “have to compete hard enough for customers’ business”. Open finance will give businesses more in-depth data from their customers.

These new alternative sources of non-bank financial information can help financial innovators get a wider view of the population’s real financial activity and needs. One that actually describes their daily transactions, even if they don’t take place in a bank. As a result, companies’ potential customer base increases, as it does their ability to develop more relevant and tailored services for them. In regions where a big percentage of the population is still unbanked or underserved, such as Latin America, the potential impact of Open Banking was limited. Because, in absence of banking data to connect to, people would still not be eligible for the newly created products and services. A simple definition of Open Finance could be that it is a data-sharing model that allows users to share their financial data with third parties.

Integrating CRIF, our mother company, account aggregation service within PSD2 countries: NEOS

Open data provides your customers with an overview of their financial and non-financial products all in one place. Consumers were permissioning their data for use in fintech apps and other solutions long before the terms “open banking” or “open finance” were coined. These sharing and permissioning actions encompass the data currently covered by open banking and open finance in the E.U.

For years, limited access, inherent inefficiencies and a highly illiquid marketplace have prevented investors and issuers from unlocking the full value of the $9.5 trillion alternative asset market1. Openfinance is providing a unique opportunity to discover liquidity and transparency in the alternative asset space. This makes it possible to verify which solution is best for you at that particular moment.

Or consider the example of purchasing the vehicle in the first place. In the past, buying a car was a time-consuming process, not to mention a hassle. Today, customers in certain countries can browse for a vehicle, get the right loan, and have it delivered to their home all through using one app on their phone. The necessary exchanges of information are enabled by Open Finance, powered by Application Programming Interfaces . One recent study of 758 financial professionals and banks revealed that 85% of respondents felt open finance was making the industry more collaborative and having a positive impact. The European Commission issued a legislative proposal for a new open finance framework this year, and the U.K.’s Financial Conduct Authority has published a call for input on the development of the technology.

Tesla’s Success Is Being Able To Inspire Our Future View Of The World

This opens up for better-tailored consumer services, for payments as well as other financial products. Competitive market breeds innovation which in turn benefits the end-users. With newfound access to banking data and services, new fintech players could offer better products and services, challenging large retail banks in the process. Open Banking established the framework that allows users to share their banking data and their ability to transact across banks, fintech firms and third-party providers through Application Programming Interfaces . The growing acceptance of open finance platforms can revolutionize the way banks and financial institutions manage user data and lead to massive developments in financial services for both the customers and third-party providers.

  • Today, open banking solutions exist that allow merchants to process payments via thousands of top EU and U.K.
  • Not only will it give customers more power over their data, but it will also lead to new innovations in finance and payments.
  • Application programming interfaces will play a key role in making this happen.
  • OCC released new risk management guidance on third-party relationships, specifically called out screen scraping.
  • Within the framework of Open Finance, any financial data created on behalf of consumers by institutions they use will be owned and controlled by consumers and no one else.

Brokers, foreign exchange companies, pension funds, and other economic systems can also benefit from Open Finance. Open finance brings exciting opportunities for both banks and fintech. The evolution of open finance technology can bring a wide array of benefits to payroll and HR, utility companies, mortgage lenders and pension funds—but the technological possibilities will be equally valuable in the broader e-commerce landscape. We have the technology today to extend these types of benefits to those outside the financial system.


Open Finance expands the reach of this concept to more sources of data. For example, it includes data from fiscal authorities, insurances, pension funds, or even utility providers like electric companies, which can be also be accessed, enriched, and leveraged to build new financial products thanks to this model. Open finance will enhance open banking’s benefits to both businesses and consumers. Not only will it give customers more power over their data, but it will also lead to new innovations in finance and payments. Open finance can bring open banking principles to a greater array of financial products, creating more value for consumers and businesses. As with open banking, open finance seeks to put control of financial data back in the hands of customers.

As we transition technologies and enable more seamless digital experiences, we, as an industry, alongside regulators, must ensure that consumers have data continuity. I’m honored to get the opportunity to lead a Special Interest Group for OpenAPI regarding Open Finance. This group will be centered around updating OAI specs and use cases for developers working as part of financial institutions or interested third parties.

Connecting customers with 3rd-party services

In the U.S., what’s commonly referred to as open banking encompasses where the E.U. Both Banking as a Service and Open Finance contribute to creating unique financial products and experiences for customers. In Banking as a Service, this solution allows non-banking companies to start operating in this sector. Open Finance sets the standard for how banks and other financial institutions share data. It’s a well structured technological solution designed to facilitate client finance control.

The European Commission has just wrapped up a public consultation on open finance. Recognising that a person’s financial life is not limited to their payment account, the EU is looking at how to expand the principles of open banking in other areas as well. KPMG employs more than 230,000 people in 144 countries and territories. KPMG’s experts within advisory, audit, tax, and technology serve the needs of businesses, governments, public sector organizations, not-for-profits, and the capital markets.

The Open era is about Banking as a Service

Open finance is believed to be an extension of open banking, allowing third-party data exchange to affect a broader variety of financial goods and services. Unlike open banking, open finance is a much broader concept of data, products, and services, which cover the entire financial sector. A trustworthy third party might access your pension, tax, and insurance data with the user’s consent, which reveals greater customer services, payments, and financial goods. The legislation and technology resulting from it could significantly disrupt the financial marketplace, creating an atmosphere of innovation and unlocking new opportunities for consumers and businesses alike.

Specifically, it could allow third parties to access a broader range of customer data from savings accounts, investments, pensions, mortgages, insurance and much more. In turn, that data can be used to create more personalised and intuitive financial products. Customers will share their financial data — no matter where it comes from — with third parties through APIs and get access to new value-adding products and services tailored to their specific needs. The industry is rallying around Open Finance VS Decentralized Finance Systems OFDSS because it will help raise the bar for data security in the fintech ecosystem at a time when the pace of innovation is accelerating. It provides a strong framework that helps fintechs improve security while enabling innovation, gives banks reassurance about the companies connecting to their APIs, and, most importantly, helps protect consumers. Yet the shift toward Open Finance will force financial institutions and policymakers to confront a host of thorny technical challenges.

Karin has almost 30 years of experience with transformation projects in financial services. She has a long track record of supporting primarily banks to improve their process efficiency as well as its compliance. Karin has deep understanding of corporate banking and has led several engagements to develop new products and offerings to the corporate clients of multiple Nordic banks.

Keeping the data flowing between accounts and apps securely and efficiently will continue to fuel innovation and provide benefits across the industry. As open banking has democratized and revolutionized finance, open finance will foster collaboration between third-party suppliers and the traditionally closed financial sector. Consequently, customers will get access to their financial data in a more simplified way and know every detail about their money savings. https://xcritical.com/ With the rise of payment methods such as buy now, pay later , open finance can be utilized to streamline creditworthiness assessments. Within the framework of Open Finance, any financial data created on behalf of consumers by institutions they use will be owned and controlled by consumers and no one else. When the data is then being reused by any other service provider, it takes place with the consumer’s informed consent and in an ethical and secure manner.

A deep dive into the important statistics, charts and stories behind the growth of open banking consumer adoption. Open Finance was first mentioned in the Digital Finance Strategy published by the European Commission in 2020. Since then, it has been a “buzz word” in the financial industry, creating both curiosity and concern. In this special guest blog for Nordea, Karin Sancho, Partner & Head of Financial Services at KPMG, sheds some light on this hot topic. Open.money needs to review the security of your connection before proceeding.

Open finance: rules and regulations

It’s one of the most important ways that open banking can evolve and work in practice. Using the very same APIs, banks can embed their products into other platforms – known as Banking-as-a-Service, or BaaS. While hacks and attacks remain a risk, fintech are working every day to prevent them. In other areas, however, open banking is much safer than traditional security methods from legacy technology. Open finance is still in its infancy – especially when it comes to wealth management.