The Centre for Finance, Innovation and Technology (CFIT) has released a report highlighting the advantages of open finance, aligning with the Kalifa Review.
Finextra had the opportunity to interview CFIT CEO Ezechi Britton about the main insights from this report. CFIT spearheaded an open finance coalition, collaborating with over 60 financial partners, including Citizens Advice, Experian, EY, the FCA, FDATA, HSBC, IBM, Iwoca, KPMG, Lloyds Banking Group, Mastercard, Monzo, and Revolut.
Britton noted that their research indicates that implementing open finance and enabling personal data mobility could potentially add £30.5 billion to the UK GDP.
The report’s findings are linked to two key proofs-of-concept. The first demonstrates that open finance could enhance SME lending. A pilot project with HSBC UK revealed that utilizing new datasets and auto-populating business loan applications could significantly improve lending decisions for SMEs. CFIT reported that a quarter of SMEs that had their loan applications referred for manual underwriting could have secured financing if open finance were in place, thereby reducing the number of SMEs abandoning their applications.
The second proof-of-concept involves a collaboration with Citizens Advice. “By increasing the automation of manual processes, debt advice agencies could assist more individuals managing financial challenges,” Britton stated. Through open finance, an additional 150,000 people annually could receive advice.
These concepts are being presented to the UK fintech and financial services sectors for further development into prototypes. Additional use cases identified include retirement and pensions, savings and investments, Digital ID, and cash flow management.
Britton outlined several recommendations from the report, emphasizing the development of case studies and an open finance roadmap. He asserted the need to find a commercially viable strategy to encourage participants to share financial data.
The report calls for the establishment of three distinct bodies moving forward. Britton expressed the need for an accountable entity to propel the open finance agenda, noting the existing work with JROC and open banking but highlighting the necessity for a dedicated focus on open finance.
The second proposed body is a consent and authentication working group, which Britton indicated is already in discussion across various government departments to avoid duplication of efforts.
The final recommendation is the formation of a task force aimed at prioritizing the development of open finance APIs, which would complement ongoing open banking initiatives.
When asked what open finance can learn from the open banking experience, Britton remarked that open banking has reached a critical juncture and has stalled. He stressed that the industry must be proactive and ready to evolve beyond open banking.
Looking ahead, Britton added, “We will continue to collaborate with the industry and Treasury to establish these working groups and the task force, advancing these proofs-of-concept. Ultimately, it’s about partnering with regional stakeholders to showcase and implement the benefits of open finance throughout the UK.”