Open Banking initiatives are gradually being introduced by regulators worldwide, and this transformation should not be viewed simply as a regulatory reform; it represents a global shift poised to redefine the financial services landscape.
Carlos Figueredo, founder and CEO of Open Vector and former head of data standards at the Open Banking Implementation Entity (OBIE), emphasizes the necessity of a cultural shift within banks to facilitate the transition from Open Banking to Open Finance. He believes this shift is crucial for fostering innovation and sustainability.
“The era of brick-and-mortar branches is behind us,” Figueredo asserts. “We are stepping into the age of Open Finance and genuine collaboration. The insights gained from Open Banking can now be leveraged across various sectors, maximizing data accessibility and empowering consumers to take charge of their own information.”
Central to this evolution is social inclusion, with financial inclusion serving as a vital secondary component. However, Figueredo notes that banks remain hesitant to share data and disrupt traditional business models, which predominantly cater to ‘banked’ consumers with lower credit risks.
He poses the question: what about the millions who remain unbanked? “Open Banking and Open Finance present a transformative opportunity for these individuals—one that the banking sector historically overlooks, viewing it merely through a commercial lens.” He advocates for industry collaboration to drive innovation for underserved populations.
Taking Nigeria as a case in point, Figueredo highlights the urgent need for both social and financial inclusion in a country where only 30 million of its 200 million residents are banked. He argues that Open Banking could lead to reduced corruption and crime by minimizing cash reliance.
Turning to the topic of Sustainable Finance, which is gaining traction, Figueredo notes that in 72 countries, women are still barred from opening bank accounts, illustrating a form of social exclusion that Open Banking can address.
“The empowerment of data will dismantle these barriers, fueled by consumer demand for access,” Figueredo states. Yet, he raises the question of how to ensure that data transfer across the supply chain is both transparent and sustainable.
He points out the substantial responsibility involved in managing customer data, stressing the importance of adhering to standardized regulations for its proper use and accessibility by third parties, ensuring the benefits accrue to consumers.
Figueredo concludes by highlighting that consumers are primarily interested in accessing services, not the complexities behind them. “Should we focus on educating consumers, or instead ensure they are protected by existing regulations?” he wonders. He expresses uncertainty about consumers’ propensity to grasp how their data is utilized, labeling this as an ongoing challenge. He anticipates a future shift from Open Finance to Open Data, paving the way for broader inter-industry sustainability efforts.