Change is coming! Did you know that your financial data is largely inaccessible and confined to your financial institutions for analysis and marketing? If this wasn’t the case — you’d be able to make safer payments, take out loans in a jiffy and have a whole array of other financial services available to you.
That’s exactly what open finance is trying to do! Open finance advocates that consumers have ownership of their financial data so they can receive more financial services and an array of other benefits. However, for open finance to become a reality in SA, The FSCA (Financial Sector Conduct Authority) has made a proposal in a consultation paper for a set of standards that have to be defined to ensure that open finance arrives in South Africa with a safe, well-regulated bang.
Consumer consent
Open finance is all about giving you control over your own data. Consent from you, as the consumer, is therefore one of the most important factors in open finance. One of the open finance standards in South Africa would be that your data cannot be used without your consent. Before giving your consent, you should be made aware of exactly what your data will be used for.
Data literacy
In order for open finance to be used fairly, everyone must be on the same page. This means that the vocabulary regarding open finance will have to be standardised and those involved will have to be educated regarding all aspects of open finance. This applies to the data owner (you), the bank who will share the data and the third party who will receive the data.
Open API standards
Open Application Programming interfaces (APIs) are proposed as the standard mechanism for data sharing in an Open Finance context, according to the FSCA. An open API is the interface that would be used to access your data. Usually, open API’s hold information that is available to the public, however in this case, your data would only be available if consent were given. Since this API would be used by everyone in the open finance industry, it’s key that usage is standardised. This will ensure it’s easy for everyone to understand and that it’s used fairly.
Free to all
The FSCA recommends that financial service providers share consumers’ financial data with third party providers free of charge. In instances where value is added or another service has been performed, a fee may be charged.
Protecting data
Lastly, the FSCA advocates for a liability framework to hold financial service providers and third party providers accountable, and an ethic framework to ensure no discrimination takes place.
In a nutshell
Implementation of these standards will ensure our financial data is freed in a safe and ethical manner, in order to add significant value to our lives. Open finance has the ability to change the financial landscape in South Africa for the better by introducing us to a world of benefits that will help us on our journey to becoming financially independent.
