Seizing the Opportunity: From Open Banking To Open Finance – Part 2

May 24, 2021
min read
Seizing the Opportunity: From Open Banking To Open Finance – Part 2


In Part 1 of this article, we’ve seen the impact of Open Banking, from empowering customers to make better decisions around products available in the market, to allowing banks to collaborate with Third-Party Providers (TPPs) for a healthy growth of the ecosystem.

Open banking is still in its infancy and most banks are starting to slowly adopt the new rules of the game. However, according to Celent’s research [1], there’s a growing interest in moving beyond banking services that are payment-oriented into providing customers with the opportunity to enable TPPs to access data across their full financial lives. And that will take the form of Open finance.

Open Finance as an extension of Open Banking

It’s believed that growing Open Banking out into other financial products too will be good for competition and consumers. Indeed, this broader scope will give customers more control over a wider range of their financial data. This includes savings, insurance, mortgages, investments, pensions and consumer credit. For this reason, a Call for Input was announced in 2019 by the Financial Conduct Authority (FCA) into Open Finance, which keeps being updated.

Therefore, Open Finance should be seen as an extension of Open Banking. It’s expected to complete the overall ecosystem by incorporating services for products. According to Celent [1], there’ll be three main outcomes from this adoption:

  1. Immediate opportunities. Expanding existing open banking-enabled services: account aggregation; product switching; enhanced credit scoring/ loan applications;
  2. More specialised and complex services. Long-term retirement planning support; Financial wellbeing; SME and corporate lending;
  3. New business models. Automated deposits management; AI-based investment and financial planning tools; automated product switching.

And it doesn’t end here. After Open Finance, comes Open Data. The European Commission recently published a Data Strategy for the EU Single Market. This goes beyond Open Finance, suggesting recommendations rather than prescribing regulations. The main goal is to “create an attractive policy environment by 2030 in which open data can thrive thanks to improved standards, infrastructure and data availability”. (See Finextra, 2020).


The Path Forward for Banks and IT Vendors

Open banking has the potential of bringing fundamental change to the value chain. However, it also rises considerable risks and opportunities for the financial industry.

As such, Celent provides several recommendations. On one hand, that financial institutions should look to follow to maximise their response [1]. On the other hand, that vendors should embrace to grasp opportunities from Open Banking and Open Finance ecosystem [2].

On the bank side:

As with Open Banking, banks will need to test quickly and fail fast on Open Finance. Being a new business model, they will need to adapt and learn how to overcome barriers.

On the vendor side:


Moving Forward

Regulatory barriers are fading, the Financial World is opening up, competition is increasing and there’s a whole new room for collaboration. With the advent of PSD2 and Open Banking initiatives, banks are competing with emerging Fintechs, TPPs and very soon with Tech Giants like Amazon, Facebook and Google, who’re seeking to own either part of the consumer journey.

Open Banking and Open Finance are still in their early stages, and the ecosystem will take some time to scale. However, banks in general need to define clear plans and roadmaps, as well as strategies around opening up APIs for third parties, considering how they plan to consume the APIs of others. According to Celent [3], while exposing APIs is currently getting much of the focus in the market, the ability of banks to act as TPPs is arguably more transformative.


[1] The Steady Rise of Open Banking: Laying the Foundations for Open Finance by Celent

[2] The Evolution of Europe’s TPP Ecosystem: Assessing the Health of Open Banking by Celent

[3] Open Banking Enables New Retail Banking Propositions in Europe: Lessons and Challenges from the TPP Ecosystem by Celent



Written by
Patrícia Sampaio Nunes
Download White Paper
Ready for a deep dive?