The True Potential of Open Finance | Mambu’s Banking Insights for Growth

Mambu’s Banking Insights for Growth is back and this time we have a conversation between Peter-Jan Van De Venn from Hexaware and Frank Krieger from Mambu, who tackle the exciting and at times uncertain prospect of Open Finance in the banking space and beyond.

We hear how it could be used in other financial arenas and the challenges facing standardisation. Is a rebranding needed to get consumers onboard? And what is the true potential of this technology, particularly as we enter the PSD3 era?

Read on to find out more and be sure to head to Mambu’s latest blog for the full lowdown the transformative power of open finance and the opportunities it presents.

Open Banking Vs. Open Finance

What started as Open Banking has become Open Finance, something with broader implications and potential benefits.

Our two experts begin by making a distinction between Open Banking and Open Finance. While Open Banking primarily deals with payment initiation and access to accounts, Open Finance encompasses a wider range of financial products, including insurance and investments, something you can read more about on the UK’s official Open Banking website. This broader scope presents numerous opportunities, making it a hot topic in the financial industry. Both speakers emphasise that Open Finance aims to unify various financial instruments, providing a comprehensive view of a consumer’s financial landscape.

We also find out what the benefits of Open Finance are for both consumers and financial institutions. Krieger, who is Chief Information Security Officer at Mambu, says that for consumers, the ability to see various financial products in one place can lead to better financial decisions. The consolidation of financial information allows for improved visibility and oversight. Conversely, for financial institutions, having a holistic view of a customer’s financial activities enables them to offer personalised advice and reduce risks. This comprehensive insight can in theory lead to a better customer experience and competitive advantage for banks that adopt Open Finance early.

The Big Challenges

Hexaware’​s VP of Global Digital Banking and Business Development EMEA, Van De Venn, pointed out some of the challenges posed by the implementation of Open Banking and Open Finance, particularly around the standardisation required across multiple industries like pensions and investments. A clear regulatory framework is essential to ensure consistency and safety and both speakers note the importance of consumer education in addressing concerns about privacy and security. Frameworks, such as the PSD2 and subsequent PSD3 regulation, need to allow consumers to control what information they share and with whom, enhancing trust and adoption.

There’s also a possibility that the way the whole thing is framed, doesn’t help its perception, with ‘Open’ not necessarily being the best word to associate with an individual’s private data. Krieger therefore suggests ‘Smart Banking’ is possibly a better way of looking at it. Ultimately, effective communication about these regulations and their benefits is crucial for consumer adoption, along with a feeling of safety.

A number of other factors are discussed in the move towards greater adoption, including technological readiness required to make sure Open Finance works and the possibility of integrating AI to maximise its benefits.

This conversation ends with a call to arms for the financial industry to take customer education around this topic seriously, if it wants to reap the rewards and provide a better service to their customers. This in-depth look at the transformative potential of Open Finance and the steps needed to ensure its successful implementation and adoption, is yet another fantastic addition to Mambu’s Banking Insights for Growth series. Check out the previous episodes on our website.