Open banking has been a game-changer for the financial industry since its introduction five years ago.

The concept of allowing customers to share their financial data with third-party providers opened a host of new possibilities for financial services and products. However, the industry is now moving beyond this to the next stages of development: open finance and open data.

Open finance takes the principles of open banking and expands them to include other types of financial data, such as insurance, pensions, mortgages and investments. This will allow for the creation of new products and services that were previously impossible, such as personalised financial advice based on a customer's entire financial history, not just the information held by their bank, or fuller, more accurate risk assessment and faster, fairer and more inclusive decisions.

One of the main drivers behind the shift towards open finance is the need to truly fulfil what open banking promised –frictionless free movement around the financial system. This has always been stifled slightly by the need in some cases to break out of a fully automated process and request manual information or to have a 300° view of a customer, but not 360°. Open finance will plug these gaps and allow us to provide intelligent services that save time, add value, and ultimately, provide better outcomes for both businesses offering products and, importantly, for consumers too.

This evolution does not come without its challenges. I am a huge supporter of the UK’s original approach, with a centralised authority ensuring standardisation and a unified set of technical and regulatory steps for all players in the market. As we move beyond PSD2 and regulatory compliance driving new features, we must continue to guarantee interoperability between different financial institutions and platforms. To keep competition alive in the UK, we also need to make sure it is cost-effective and not overly complex for innovative small companies to connect to the ever-growing numbers of providers and work in a standardised way with the data they receive.

Another significant challenge in the industry is who pays for this new set of ever-moving technical goalposts. With open banking, we’ve all been spoiled by the free-to-access APIs provided at vast expense by the big banks. A new model must be found that ensures uptake by the data holders, including the smaller providers, whilst also allowing the creation of services – that are often free to end users - to be built upon them. If this model cannot be found, then adoption will be low, either leading to low market coverage, or low market adoption. Both outcomes have the potential to cause confusion among consumers if their provider is not covered by an application or, if there are still gaps in a providers’ full view, frustration at slow or inaccurate decisions.

It is certainly exciting to see the industry moving in this direction and to create products that provide in-depth, real-time insights for providers. At CRIF, we will continue to work with regulators and the ecosystem closely to help overcome these challenges and reach the potential that open data promises.