At the moment, all of your personal financial information is kept under lock and key by your bank and maybe one or two other financial institutions. Open finance is set to change that. It’s a new concept that will give consumers — that’s you! — the right to choose who you share your financial data with. It also enables safe and easy sharing through the use of clever technology.
Who, what and how?
Every person has the right, under law, to share their data with consent. Every person also has the right to be informed if someone is collecting or distributing their data without their consent. This applies to your social life on Instagram, to the information you share with MTN when you apply for the latest Samsung Galaxy on contract, and to your financial information.
But you have to be aware of what you’re consenting to.
There is obviously some risk involved when your data is exchanged and aggregated by fintech and other companies within the open finance framework. You need to take ownership of the process and understand who you are giving consent to, for what purpose, and how your data will be used to your benefit.
Let’s use 22seven as an example: you can give 22seven and your bank (that’s the who part) consent to share your transactional data (the what). 22seven uses this data to categorise your transactions so that you can see exactly what you’re spending your money on. A personalised budget is then generated based on your spending behaviour, helping you to better manage your monthly expenses. The last part explains how the sharing of your data improves your life.
For the proposed open finance framework to succeed, financial service providers need to be able to access a single view of someone’s financial portfolio. This is tricky, especially if the data is spread across various institutions like banks, insurance companies and fund managers.
To make this process as seamless as possible, technology has been developed that uses application programming interfaces (APIs) to allow different institutions to “talk” to each other safely and securely. The technology will also hopefully give each person a bird’s-eye view of his or her entire financial situation — all the information easily accessible in one place — something that’s not easy to accomplish today.
Ultimately, open finance will make it much easier for fintech and other companies to develop innovative products and services that will benefit you as a consumer, allowing you to understand exactly what’s going on with your money, and empower you to take control of your financial journey.