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A coalition including the Bank for International Settlements (BIS) and the International Monetary Fund (IMF) has announced new open finance guidelines intended to improve financial inclusion.
The high-level guidelines are aimed at public authorities seeking to harness open finance to accelerate digital financial services and innovation and increase usage of a broader range of financial products.
According to the coalition, open finance “can be the next frontier” for the growth of the financial services industry.
They point out that 76 percent of the world’s population now have access to a financial account and open finance can expand their use and increase the benefits customers derive from financial services.
Her Majesty Queen Máxima of the Netherlands, the United Nations Secretary-General’s Special Advocate for Financial Health (UNSGSA), said that as open finance becomes more prevalent, there is an opportunity to shape it in a way that benefits everyone, especially those who have so far been financially excluded or underserved.
“While we have made great strides in expanding access to financial accounts, much work remains to ensure that individuals are actively using and benefiting from a broad range of financial services that meet their complex financial needs, including savings and insurance products," said the Dutch royal.
“With appropriate data and consumer safeguards in place, open finance can play a transformative role in deepening financial inclusion and enhancing consumer financial health.”
What needs to be considered?
According to the guidelines, considerations for the design and implementation of open finance frameworks should begin with clear identification of policy objectives and market barriers.
They say authorities need to outline how open finance will address these barriers and contribute to desired outcomes, while ensuring the foundational elements for success are in place.
The coalition has also said that effective leadership by public authorities is essential, requiring collaboration both across governmental bodies and between public and private sectors.
It believes governance structures need to be transparent, inclusive and aligned with the framework’s objectives, ensuring representation of all stakeholders and the smooth operation of the ecosystem.
The coalition has also said that regulation of open finance needs to be risk-based and proportionate, defining clear rules for customer-permissioned data access and addressing obligations for participants.
It says oversight and supervision mechanisms should provide authorities with the enforcement powers, capacity and resources needed to monitor and manage the framework effectively.
The guidance says that robust consumer and data protection frameworks are critical to building trust and fostering adoption, with valid consent and authentication processes at their core.
They say public awareness initiatives should be considered to educate consumers on the benefits and risks of open finance, enhancing financial literacy and inclusion.
The guidelines also state that broad participation of financial providers is vital, supported by standardised APIs and interoperable architectures, adding that pricing strategies need to promote fairness, accessibility and alignment with overarching policy goals.
Plenty of potential
“Open Finance done right could be a game changer, making it possible to bring financial services to people who traditionally have had none,” said World Bank group president Ajay Banga.
Banga also said that it could be a “boon” for small businesses. “We’re working with countries to promote open finance and help us reach our goal of providing capital to 80 million more women entrepreneurs who currently have little access to it.”
Kristalina Georgieva, IMF managing director, struck a more cautious tone about the outcomes, suggesting that the entry of new financial players can boost innovation and competition, but it also creates regulatory challenges.
“Competition may be at risk if dominant players from other sectors can access financial data without sharing their own. Public authorities will need to closely monitor the ecosystem to ensure it meets policy objectives,” she said.
Meanwhile, BIS general manager Agustín Carstens said that open finance “holds great promise”, agreeing with his IMF counterpart that “the benefits can only be realised if accompanied by adequate regulation and safeguards”.
“This joint effort to outline the key considerations for open finance will contribute to the design and implementation of sound frameworks.”
