What is Open Finance and its features
Digital technology continues to evolve rapidly. This has been facilitated both by the widespread use of the Internet and easy, fast access to the Web, and by the emergence of inexpensive, but high-quality smartphones. Digitalization has reached an unprecedented scale, penetrating into many areas of people’s lives. The fintech industry is no exception. It constantly evolves and acquires innovative technologies. Open Banking and Open Finance are considered to be the most significant trends in FinTech today.
Open Banking is a secure way to exchange data via bank APIs between financial industry participants that offer investment and retail banking services. Open Finance extends the capabilities of Open Banking and allows the client to provide a wider range of financial services in addition to banking services.
In addition, the technology makes it possible to create a personalized experience for customers by manipulating the financial data they have access to. Open Finance also allows everyone to have access to financial data, enabling them to make informed decisions, create new business models, and reduce the possibility of risk and fraud.
Open Finance was developed in 2017 as a regulatory initiative in Europe. However, the technology has now become more global, penetrating key international jurisdictions that have relevant initiatives. In particular, the development of Open Finance is due to the fact that it allows market participants to use data to develop new services. This is crucial at a time when financial market players are under pressure from the pandemic crisis and the growth of the broader digital economy.
In addition, new players in the market are emerging in the form of non-financial service providers, which are actively penetrating the fintech sphere. Thus, more experienced players acquire new competitors, and this is another lever of pressure on them to develop.
Experts predict that Open Finance will become one of the links in the chain that will form a new shape in the industry. It will lead to the creation of an ecosystem where various market representatives will participate: banks, technological giants, fintech companies, and non-banking institutions. This ecosystem will combine seemingly incongruous factors and will be both competitive and cooperative. This gives Open Finance its unique features, as well as additional space for the development of companies working in the fintech segment or those who intend to master it.
In the near future, Open Finance is predicted to penetrate deeply into the financial sphere and become a normal phenomenon. Functions based on this technology are expected to become so harmonious that they will be almost invisible in users’ applications.
