Open Banking and Open Finance

24 September 2020

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Open finance is expected to take the concept of interconnected systems and transparency initiated by open banking and expand its reach across the broader financial spectrum, including pensions and investments. Yet open banking’s take-up has failed to meet its hype, despite the obvious efficiencies. This session looked at the opportunities, barriers and possibilities for the wealth management and financial planning sectors and their clients.

Expert: David Barks, Director Wealth, Savanta 

Key takeaways:

  • The concept is very attractive but in reality, the benefits are simply not appealing enough, or being marketed in the right way.
  • There must be clear incentives at all points of the value chain – provider, intermediary and end client – in order to spur better uptake.
  • The demand from a younger, more digitally savvy audience, such as the HENRYs (High Earners, Not Rich Yet), will drive innovation and greater adoption.
  • Trust, reliability and privacy concerns are still a major hurdle for the more traditional client base.


  • Open banking uses open APIs to give multiple providers access to your financial information. The UK and European authorities are consulting on processes to extend this reach to enable secure access to financial data beyond bank accounts, looking to include savings, mortgages, investments, pensions, and insurance.
  • On 1 October, the FCA closed its Call for Input over open finance, though no one from the round table submitted a response, suggesting that the voice of the wealth management community might be under-represented in any final guidelines that are published.
  • A quote taken from the FCA consultation said it would “allow consumers and SMEs to access and share their data with third party providers, who can then use that data to develop innovative products and services which meet their needs, today, and in the future…”
  • While this suggested the regulator was looking at open finance as a sales opportunity for providers, the group seemed to be in agreement that benefits to the client should be the driving force.

Main benefits:

  • Clients want greater transparency and to feel more in control.
  • Easier switching and holding providers to account (if that is a benefit, as the FCA has suggested).
  • Clearer, more holistic view of all financial holdings.
  • Empowering clients to have a better handle on their financial situation, allowing the adviser to initiate more meaningful conversations, bringing in expertise as and when appropriate.
  • Enables wealth manager/adviser to give more comprehensive advice more quickly, as manual processes are reduced/removed, leading to better client engagement, better service and, ultimately, a higher share of wealth.
  • Greater opportunity for client interaction: from a large firm promoting more products or services, through to a smaller advice firm offering a nudge over more cost-effective budget planning.
  • Client retention: Once a client goes through the onboarding process with a client portal and brings in their existing data (either through data scraping, such as Yodlee, or through true open finance once it gets here), there is ‘stickiness’ advantage; they are ‘tied in’ and will unlikely want to go through all that again.
  • Providers could save massive overheads (i.e. huge teams exist only to provide valuations in an onerous manner. If open finance automated that process there is a clear cost saving to be had.

Main barriers:

  • API development: a lot of small businesses don’t have resources to develop their own so does that leave it down to platforms, CRM providers etc?
  • Portfolio and fund comparability – if it is all about giving client a clearer view, how do you guide them through that process? Giving them data is one thing but having common standards is a huge challenge across the industry.
  • Cultural and corporate – is digital a factor across the business? If not, why not? Cost factor?
    • e. No one from the session contributed to the FCA consultation, so do they care?
  • Issues over trust and security make it hard to persuade the clients of the benefits.
  • Client apathy – what’s in it for them? Only 3% take-up of current account switches in first year, but energy provider switch stood at 30%, because a more immediate benefit.
  • Will you get 100% whole of market take-up (e.g. a small SIPP provider may not engage). Do they need to? 80% of market may be enough.
  • Early-stage experience with providers has been fairly poor.
  • Need to consider the trade-off between privacy and convenience.
  • One delegate said: “Open banking has been hard enough for the big banks to take on. I cannot imagine all providers across financial services would ever get there. I’m not sure there is the appetite, the tech know-how or the financial clout for them to manage it.”