Open finance, ‘open X’: What’s the use?
On 24 June, the Lab and StepChange Debt Charity held an online workshop to build understanding of open finance and what it means for consumers and citizens. It marked the first event of our joint project to start a new conversation about this major development in data-driven finance.
Watch a recording of the event here.
Over 60 representatives from third sector organisations – including credit unions, responsible finance providers, financial health charities and responsible tech advocates – participated in the event.
A remarkable number of those that joined us, over half, are already working with open banking – the prototype for open finance, which was introduced in the UK in 2018 – either in their operations or as part of advocacy efforts (or, as in the case of StepChange, both). For example, a number of credit unions are working with third parties to access their members’ open banking data to support loan application processes. Similarly, some debt advice organisations are working with open banking to pre-populate budget sheets and draw up financial statements. Charities are exploring how open banking data could be used to help them better understand and benefit their beneficiaries. NGOs and think tanks are undertaking research and campaigns to ensure that the rules and infrastructure shaping open finance, and its use, are capable of delivering good outcomes for consumers, citizens, and wider society.
We were joined by five fantastic speakers. David Beardmore, Ecosystem Development Director at the Open Banking Implementation Entity provided an introduction to open banking, including how and why it came about, and examples of the new businesses and services it has made possible. Siobhan Dennehy, Head of Economic Regulation at the Department for Business, Energy and Industrial Strategy spoke to ‘smart data’, a related data sharing initiative that also aims to give people more ‘consumer power’ and is being led by policymakers. Andy Lamb (Product Manager) and Vanessa Northam (Head of Strategic Relationships) from StepChange shared their experience of working to understand the opportunities of open banking to deliver debt advice and help their clients, and putting that into practice. Read Andy’s blog here.
We had a lively discussion, surfacing questions that included:
- What evidence exists that open banking has succeeded in enabling new financial services that people need and want, or in increasing competition in banking? In particular, is any information available about the distributional impacts? Whose role and responsibility is it to undertake an objective evaluation of the initiative and make the results publicly available?
- How can we ensure that new open finance-enabled services do not exacerbate digital and financial exclusion? More ambitiously, how could an open finance ecosystem develop that specifically delivers better outcomes for people who are currently underserved and excluded?
- How meaningful is the consent people are required to give in order to share their payments data under open banking? Could firms make access to their services conditional on customers sharing their open banking data, or could they offer preferential rates to those who share their data – potentially creating a two-tier system based on willingness to share personal, sensitive data?
- What will be the legislative basis for open finance and smart data, and how can social and environmental outcomes be put at its heart?
- How effective and appropriate has the governance model for the development of open banking (via the Open Banking Implementation Entity) been? How can third sector organisations working with open banking provide feedback about the standards to improve them, particularly with a view to user experience, accessibility and inclusion?
- What governance model and new entities are likely to be required to develop and oversee open X and smart data? And, how could third sector organisations best be supported to participate in them?
- How will new bodies (including the Smart Data Function and Digital Markets Unit) operate alongside one another, and how will regulatory bodies collaborate to ensure protection and redress for people who share their financial data with third parties?
- How should we talk about open finance? Is it misleading to describe it as “giving people control over their data”, when the information about their payments has been collected and is in fact owned by financial institutions?
To close the discussion, Faith Reynolds, chair of the Open Banking Consumer Forum, reflected on the importance of looking beyond the features of new data-driven products to the business models underpinning them, as well as the infrastructure and policy frameworks that ultimately determine whether open finance-enabled services can drive better outcomes for everyone.
The third sector holds unique expertise about the most important social and environmental problems we face, which has to be the starting point for understanding how the use of data and technology – and the policies that shape that – could potentially improve our lives, especially for those who are most vulnerable in and marginalised by the current financial system. Over the summer, we will work with a coalition of third sector organisations to develop a vision for open finance that puts people and communities first. It will answer the important questions raised at the webinar, and outline how we can work together as a sector, as well as with policymakers and firms as part of an ecosystem in which data-driven finance contributes to building a better future.
If you’d like to find out more about our work on open finance, or get involved, email our Head of Programmes, Marloes Nicholls.