Back view of businessman looking on copy space while standing against glass skyscraper

Singapore more positive than global peers about Global Finance progress

We may be familiar with Open Banking, but what exactly is Open Finance? Shweta Jain, Head of Product and Strategy – Digital and Analytics, Universal Banking, Finastra talks to Enterprise IT News about the next phase, and what needs to happen to get to ‘part two’.

EITN: What is open finance? How does it make the industry more collaborative, and can you give top 3 examples of this happening?

Shweta: Open Finance represents the next stage after Open Banking, where the sharing and access to consumer data is no longer limited to the banking space, but also extended to additional financial products and services such as pensions, investments, insurance, etc.

For Open Finance to happen, a few things need to align. Usually, this involves the sharing of consumer data with third parties via Application Programming Interfaces (APIs), enabling the sharing of a much broader range of financial information.

For Open Finance to happen, a few things need to align. Usually, this involves the sharing of consumer data with third parties via Application Programming Interfaces (APIs), enabling the sharing of a much broader range of financial information.

In turn, this allows players in the ecosystem to act on shared data to develop personalized experiences, develop new business models and provide seamless payments experience. Additionally, this also means that banks are no longer the gate keepers of financial services. One could be a FinTech company or even a super app and offer a wide range of financial services, giving financial inclusion a boost while ensuring these services remain responsive to consumer needs.

More importantly, open finance prevents players in the financial ecosystem from operating in silos. If they are to innovate and open up new channels of revenue, it is imperative that they start leveraging on the power of the network to create a bespoke set of financial services for their users.

Some interesting examples of open collaboration in Southeast Asia would include:

  • Microfinancing services via super apps – Super apps like Grab can use alternative data sources such as transaction data or purchasing history for credit ratings. Grab’s partnership with SB Finance to offer cash loans to drivers, users and merchants in the Philippines is a good example of how collaboration can work to offer a service for underserved individuals who generally do not have any credit history.
  • Opening new business opportunities for small players with open trade platforms – Leveraging on Finastra’s Fusion Trade platform, Vietbank was able to help a farmer in Vietnam expand overseas via their network of global customers, with full visibility of the end-to-end supply chain along with much needed access to financing.
  • Bringing the asset management and investment space together – Earlier this year, Fundnel, Southeast Asia’s largest licensed digital marketplace for alternative assets partnered with Kilde to help raise funds for BNPL provider, Atome. This is an example of how players are coming together to plug into each other’s network to generate investment opportunities.

EITN: What are the factors leading to improvements in open collaboration?

Shweta: In the last few years, Open Banking has enabled and normalized collaboration between banks and third parties, with banks reaping the benefits of leveraging the latest technology to meet changing customer needs and gain a competitive edge.

More recently, the financial services industry has seen the rise of Banking-as-a-Service, with institutions offering embedded financial services to the customer at point of need, leading to new customers and revenue streams. There is also a greater drive by many organizations to do well by doing good, for instance by addressing financial inclusion. All these form part of the shift to open which paves the way for greater collaboration within the industry.

Multiple issues affect how conducive and enabling the environment is for open collaboration. Some of the key factors include secure IT infrastructure, a well-developed API marketplace with open access, and regulatory clarity on how players from different industries are able to interact or partner with each other.

EITN: What are the top 3 outcomes of open collaboration, that you can share?

Shweta: Some of the most significant outcomes of open collaboration are broadened access to new embedded finance services for end users, improvements on existing service delivery models while new and innovative solutions are being developed, and better user experiences created.

Multiple issues affect how conducive and enabling the environment is for open collaboration. Some of the key factors include secure IT infrastructure, a well-developed API marketplace with open access, and regulatory clarity on how players from different industries are able to interact or partner with each other.

Fintechs that collaborate with banks can gain quick access to a large customer base, a trusted and well-known brand, low-cost funding and extensive knowledge and experience in risk management. On the other hand, traditional banks can benefit from a constant inflow of new ideas, services, and products, which they can test out in a cost-effective and controlled manner. As the industry moves forward towards open collaboration on the whole, industry players provide benefits for consumers who can readily access affordable services serving their needs and are empowered to make informed financial choices.

EITN: What are some of the main things Finastra is keeping a close eye upon/anticipating with regards to State of the Nation Financial Services? What areas should readers of the report look out for?

From the teaser we shared for this year’s State of the Nation report, 85% of finance professionals agree that open finance is already making the industry more collaborative and is having a positive impact.

Shweta: 2022 is shaping to be a year of recovery and transformation from the global pandemic. As we all know, the pandemic has forced businesses to have a rethink of how they should develop their business strategies moving forward.

From the teaser we shared for this year’s State of the Nation report, 85% of finance professionals agree that open finance is already making the industry more collaborative and is having a positive impact. This statistic only represents part of the story.

Our full report will give a sense of how financial services professionals in APAC and around the world think of other important topics, including the drivers and concerns when it comes to collaboration, what businesses want from regulators, and what kind of technology is expected drive the implementation of open finance.