Open Finance builds on the foundation and legacy of Open Banking, which has shaken up the world of current accounts and payments by opening up data for regulated providers, like Moneyhub, to access and share data, subject to customer consent. Open Finance extends those data-sharing principles to a consumer’s entire financial footprint, including their mortgages, savings, pensions, insurances, investments and more.
Wealth managers have on the whole been much slower to embrace the powerful new paradigm of Open Finance than pension funds and investment firms, and even until recently many had yet to seize the vast opportunities on offer.
But this dynamic is now changing.
Open Finance: A competitive advantage
The wealth sector is beginning to understand how Open Finance can enable greater personalisation of services, can cut processing costs and improve the suitability of propositions. And it’s not just about financial products: the data Open Finance surfaces is increasingly seen as a vital component of digital transformation and differentiation in a competitive environment.
Consumers can now access their financial data through trusted third parties, and as a result those third parties - which could be an adviser or wealth management firm will be armed with a full picture of a client’s assets and liabilities and be able to offer a never-seen-before level of personalisation for their products and services.
Open Finance opens up new markets
A new generation of investors are due to inherit around £5.5 trillion from their parents and have largely dismissed traditional wealth services as being out of touch with their digital-first, user-friendly and environmentally conscious needs.
Moneyhub supports advisers that are trying to reach a younger audience, through budgeting tools, rent recognition and sustainable investing and more.
Our partnership with The Big Exchange, an online social, environmental and impact investment platform co-founded by The Big Issue, helps grow positive impact savings and investing products.
The partnership allows The Big Exchange to use our Open Finance technology to promote relevant sustainable investing options, a digital wallet and a marketplace of complementary services, supporting a greener lifestyle.
Open Finance in practice
One of our clients wanted to offer its clients deeper insights on the holdings in their investment funds, including fees, returns and ESG ratings.
That is a great ambition but in practice is hard to achieve because fund data feeds don't always include ISIN codes. We developed a way to identify funds by taking certain key data points, such as unit price, and cross referencing against Morningstar data to disambiguate. This enabled us to identify the key holdings within a fund and
the ESG profile to highlight the green-ness of a portfolio or specific investment.
Open Finance: A win-win for consumers and wealth managers
This is a big win-win: Consumers benefit from holistic and insight-driven services and providers gain in terms of lower customer acquisition costs; lower cost business processes and compliance dividends.
There are plenty of other wins with Open Finance. Just take onboarding of new clients, for example: instead of the manual data collection processes of old, wealth managers can set up an Open Banking authorised request to pull client contact and identity information from banks.
Then there’s data gathering for advisors, gone are the days of trying to collate and make sense of client data scattered across multiple advisors and systems. Through Open Finance - and with their client’s explicit permission - advisors can access all of their client’s investment portfolios in one place.
By gathering income, expenditure, assets and liabilities together, wealth managers can accurately assess the client’s capacity for loss, the suitability of products and have a system to continually monitor any changes in circumstances.
Open Finance: The difference between surviving and thriving
Open Finance truly does open up a world of new possibilities. As remote interaction looks set to grow in 2022 and beyond, the ability to build on an Open Finance platform could be the difference between surviving and thriving.
But Open Finance is just the start!
Whilst Open Finance is important, the breadth of data and the depth of value that can be derived to the benefit of the customer and the firm, is not yet widely appreciated. Open Finance is only part of a wider Open Data movement that is transforming how we think, behave and act.
“The data Open Finance surfaces is increasingly seen as a vital component of digital transformation and differentiation in a competitive environment.”
Open Data in sixty seconds
Author
Vaughan Jenkins
Vaughan is an experienced Sales Director with senior industry experience in financial services, especially the life and pensions, asset management and wealth sectors. He co-authored ‘The Insurtech Book’ and has worked as an associate and consultant to a number of businesses.