Open finance and other open data initiatives

Intimately associated with interoperability is Open Finance, by which consumers take control of their data in the financial system and gain the ability to share it with other providers, aiming for better tailored or more advantageous products. It is an effective method to reduce switching costs, reducing information asymmetries, empower consumers and promote a level playing field between large incumbents and small entrants. Open finance can significantly enhance financial inclusion by enabling broader access to a wider range of financial products and services, particularly for underserved individuals and small businesses, through greater data sharing and innovation¹ . Authorities should be wary, though, of if and how Bigtech players use Open Finance to leverage user transaction data, due to the several competition issues these actors bring to the markets they participate in.

To support competition, considerations should also be made on how smaller players can be supported in meeting the necessary standards (e.g., for standardized APIs). While maximizing provider participation may be the end goal, requiring smaller players with limited capabilities to join within a short time frame could have negative consequences, including in terms of data quality and security. A phased approach, wherein the scope of data sources and types of participants are expanded gradually, may be preferable. Furthermore, pricing policies may affect competition. For example, volume-based data access fees can put smaller players at an unfair disadvantage, limiting competition, while bilateral pricing agreements may represent a barrier to participation in open finance.