Beyond open banking: what needs to happen to make the next phase work?

Open finance could change the way we manage money. By allowing people to share data from a wider range of financial products, it could help services become more personalised, make it easier to access support and reduce some of the effort involved in managing our finances. Our new research, Open to everyone?, suggests that getting there isn’t just a question of making more financial data available. People need to see a reason to share, feel confident about what happens to their data and remain in control, especially when circumstances change. 

In our first blog, we explored what the experiences of people with mental health problems can teach us about open banking and the future of financial data sharing. We found that people can see real benefits from sharing their data while still feeling uncomfortable about it, and that participation, comfort and trust are different and nuanced.

As open finance develops, what needs to change to make sure it works for people with mental health problems and delivers better outcomes for consumers more widely?

Open finance creates huge possibilities for new products and services. We think those innovations need a clear starting point: what problem are we trying to solve for consumers? 

From there, regulators and developers must ask what a new service or application is intended to achieve, whether that benefit extends to people in vulnerable circumstances, and whether the amount and sensitivity of data being requested is proportionate to the benefit.

That’s why we’re calling on the Financial Conduct Authority (FCA) and the Department for Business, Innovation, Science and Trade (BIST) to establish consumer outcomes criteria to guide which new applications of open finance and Smart Data are prioritised, how they’re designed and how their success is evaluated.

As financial data sharing expands, the system behind it is likely to become more complicated.

Open banking, open finance and wider Smart Data schemes will involve different organisations, regulators and governance systems. Consumers shouldn’t need to understand all of that to use a service safely – and particularly not when something goes wrong.

We want the government to ensure these systems develop within a coherent governance framework, including a clear mandate for the FCA on open finance and governance arrangements that can evolve as open banking and open finance come together.

The same principle should apply to complaints and redress. If something goes wrong with financial data sharing, consumers shouldn’t have to work out which organisation or regulator is responsible before they can get help. We want to see a ‘no wrong door’ approach, where consumers can raise a problem through an appropriate point of contact and responsibility is worked out behind the scenes.

Giving permission to share financial data shouldn’t mean giving up control over what happens next. People need to be able to understand what they’re sharing and with whom, revisit that decision, change their permissions and stop sharing easily.

This is particularly relevant for people with mental health problems because circumstances can change. Someone may be comfortable sharing their data at one point but feel differently when they’re unwell, under financial pressure or simply decide that the benefit is no longer worth it.

We want consistent expectations across open finance for how people can review, change and end data sharing. 

We also want regulators to watch for what we call a ‘Privacy Premium’ – where people could pay more, miss out on suitable products or support, or face additional barriers because they choose not to share their financial data.

For years, digital financial services have focused on removing friction which is often a good thing. But friction can sometimes be a useful tool. There are times where a pause, an extra explanation or an opportunity to review what’s happening can help someone understand the consequences and make a decision they’re comfortable with.

So rather than concentrating on how we make financial data sharing as frictionless as possible, we should be looking at where friction helps and where it harms.

We want the FCA and BIST to establish shared expectations for supportive design, with stronger protections where financial data sharing could have significant consequences for consumers – without adding unnecessary barriers or ‘sludge’.

None of the recommendations in our report are intended to slow down innovation. They’re about making sure that as financial data sharing becomes more powerful, the governance and protections around it develop at the same pace.

Open finance should make managing money easier, give people greater control and help deliver better outcomes. Designing it around how people actually live, make decisions and manage their mental health problems gives us a much better chance of success.