6 minute read 7 Feb 2020
Woman making contactless payment using a mobile phone

Is trust the key to unlocking open finance?

By

Jason Whyte

EY EMEIA Financial Services Markets & Business Development Leader, EY UK Life & Pensions Specialist

Pensions strategist and visionary. Passionate about building a better retirement world. A problem solver.

6 minute read 7 Feb 2020

How to remain competitive, build trust and transform for an open, digital world.

Open finance is happening, and the industry needs to decide collectively whether it will lead the change or be led. The choice is not an automatic one. Open finance will bring significant upheaval: EY believes it will fundamentally change the nature of relationships between providers and their customers, advisors, partners, competitors and regulators, and with them the whole basis of competition for the industry.

Open finance – the idea that customers should be able to see and transact with all their financial products in a single place regardless of underlying provider – has been a long time coming.

It has been possible, in a limited way, since the earliest days of online banking, pension and investment platforms, but the scope of these digital propositions has been restricted to a small number of proprietary products. Certain FinTech applications do allow for some consolidation of a consumer’s financial holdings, but typically rely on fairly basic technology like screen-scraping. They have remained niche products, held back by concerns about security and a use case that was only compelling to a small number of users.

All that is changing now

Open banking is live in the UK for current accounts and the proposals for a Pensions Dashboard are well-developed. However, there is much more to do. Between them, the current proposals cover only the extremes of our financial lives, our most immediate financial transactions and our longest-term savings. Meanwhile, consumer response to open banking has so far been muted: The latest EY Open Banking Opportunity Index found that, whilst the UK has the world’s most mature open banking infrastructure, consumer trust and engagement lags countries like China by a long way.

Nevertheless, the Government and Financial Conduct Authority (FCA) have made it clear that they want the UK to have an open finance model that covers people’s full personal balance sheet to support their financial well-being. They are giving the industry a chance to create it, but it’s clear they will intervene with legislation if progress is too slow. 

We are at a point of inflection for the industry

Open finance is happening, and the industry needs to decide collectively whether it will lead the change or be led. The choice is not an automatic one. Open finance will bring significant upheaval: EY believes it will fundamentally change the nature of relationships between providers and their customers, advisors, partners, competitors and regulators, and with them the whole basis of competition for the industry.

Faced with radical change, the temptation to ’wait and see‘- to do the minimum needed to comply and then react as the market moves - is always strong. But we are convinced that open finance demands a more proactive response: those who do not ride this wave of change will be swamped by it. The impact will be pervasive, affecting everything from strategy and proposition development through to back-office operations. Decisiveness and speed to market will be critical to competitive positioning, balanced with a permanent shift to a state of perpetual change and evolution across the business. 

Summary

What a mature open finance model could look like

TISA’s Open Savings & Investments project aims to help, by bridging the gap between open banking and the Pensions Dashboard and eventually enabling us to see all our financial lives in one place. As it moves into the development of a pilot, Ernst & Young LLP has collaborated with TISA to identify eight hypotheses about what a mature open finance model will look like, and our vision of the required capabilities and key success factors to thrive in an open finance world. 

Download the report: Is trust the key to unlocking open finance? PDF 2.0MB

About this article

By

Jason Whyte

EY EMEIA Financial Services Markets & Business Development Leader, EY UK Life & Pensions Specialist

Pensions strategist and visionary. Passionate about building a better retirement world. A problem solver.