Author: ninagloberson

Before we address untapped industries outside the financial space, it is important to note that the wealth management use cases have not yet received sufficient attention in the design and implementation of open banking/finance in the US and Canada. Current initiatives are almost exclusively focused on retail banking use cases for personal financial management (PFM), lending and payments—with asymmetric and incomplete coverage of investing, advice, education, and retirement related use cases. These issues are insufficiently addressed by the current Consumer Financial Protection Bureau’s NPRM of the Dodd-Frank Act Section 1033: lacking support by providers and technical standards organizations for delegated access in the consent and authentication flows, inconsistent data parity by providers who do publish APIs, and prohibitions on screen-scraping by those that don’t publish APIs without alternative access solutions.

There also exists an unfair characterization that wealth management use cases are only for the rich, rather than for everyday workers, retirees, and their families who need to prepare for and live fruitful and dignified lives. Saving for and funding education, caring for elderly or disabled family members, and ensuring a safe retirement are more prevalent needs than those of the ultra-high-net worth

The CFPB and the SEC should join forces to ensure a unified data sharing ecosystem that will also support the SEC’s Reg-BI to ensure advisors’ fiduciary duty.

In Latin America, data openness can contribute not only to the financial sector but also to other sectors, such as telecom, healthcare, and delivery services, for example. One sector that has been advancing in the implementation of open data infrastructures is insurance in Brazil. The implementation will allow for the customization of policies based on more detailed financial profiles and greater efficiency in contracting. However, unlike Brazilian Open Banking, Open Insurance faces some challenges in terms of schedule and technology in the country.

Additionally, there are sectors that have not yet been widely explored when it comes to the potential of data openness. The energy sector, for example, could use financial data to offer more personalized tariffs or energy efficiency programs based on detailed consumption analyses. The agricultural sector is also a promising candidate, where financial data could be used to create more suitable financing solutions for small producers, improving access to credit. There are many challenges in this regard, from the lack of organized discussions to explore the topic to regulatory and governance impasses. I believe that in sectors beyond the traditional ones, we will first see initiatives being created and driven by the market, followed by regulatory movements.

We can learn a lot from Brazil’s Open Finance and the British model itself in terms of governance, technological standards, and adoption strategies. It is very likely that we will see interesting intersections emerging in the coming years, in a much shorter time than we saw in the financial sector. However, we still face challenges in measuring the return on investment and creating use cases that are truly beneficial for all parties involved.

Focusing on individual use cases for open banking risks material small business productivity gains. We often hear of the one-off open banking use cases for individuals: sharing data with a broker to secure a home loan or comparing banking products to find the most competitive rate, for example. Designing open banking with these consumer processes as the primary open banking use case risks the viability of sharing data for extended periods of time.

Open banking is incredibly important for small businesses, especially small businesses operating on thin profit margins. Being able to securely share transaction data with accounting software via open banking means small businesses can understand their financial position in close to real-time. Visibility of looming cash challenges means small businesses can proactively assess and manage their options. Small businesses should be central to the development of open banking regulation.

Governments around the world have recognised that data-sharing economies are the next building block for economic growth, and ultimately better outcomes for end consumers. We’ve seen this with the adoption wave of open banking and finance, where each week seemingly brings an announcement that another country has published its regulatory framework to open up banking and financial data. Of course this isn’t limited to just financial data; similar initiatives are happening in the energy, telecomms, transportation, retail, and health sectors.

However, these sectors are at the very beginning of their respective journeys, and at very different levels of readiness. One industry prime for opening up data sharing is the energy sector. The immediate benefits of optimising switching, grid distribution, and pricing are waiting to be realised. But one use case that would have profound effects on cutting carbon emissions actually relies on not just energy data, but financial data, too: automating emissions reporting to improve access for SMEs to green finance.

In the UK, Project Perseus is undertaking to do just that. A collective of banks, cloud accounting platforms, carbon accounting firms, and energy companies are working to bring this to life. Like any data sharing framework, the complexities of the liability model, the technical and data standards, the scheme rulebook, and the digital verification, consent and trust frameworks take time to sort. However, because open banking provides a starting template, work on this is happening at pace. In fact, it’s moving more quickly than the legislation underpinning the smart data framework that would formalise the broader, multi-sector data sharing economic model government is sponsoring.

While the energy sector is touted as the next industry to be opened up, it hasn’t yet been tapped in the same way banking and finance has. But regulators and policymakers are working to make it happen: for example, Ofgem, the UK Energy regulator, just published its consultation on the consumer consent solution as part of its broader Data Sharing in a Digital Future initiative, which will be interoperable with open banking and the long-term regulatory framework that will take shape for the UK’s Smart Data scheme.

We’re now seeing other sectors applying lessons learned from open banking in order to tap into the potential their sector data sharing will bring.

When discussing potential untapped industries that could benefit from open banking and financial technologies, financial advisors stand out. Traditionally, fintech tools have been associated with direct consumer use; however, technology platforms can play a critical role in enabling financial advisors, to support and manage their clients’ financial wellbeing. The primary benefit of fintech platforms for financial advisors lies in their ability to provide comprehensive financial oversight and personalized advice. Advisors can use fintech tools to gain a holistic view of their clients’ financial situations by accessing various accounts and financial data securely. This access allows advisors to craft tailored financial strategies that align with their clients’ specific goals and circumstances. The fintech tools enable automation of portfolio rebalancing, optimization of tax strategies, and real-time tracking of investment performance. These capabilities ensure that advisors can offer precise, timely, and effective advice, significantly enhancing their clients’financial outcomes. One of the significant advantages of leveraging fintech tools is the enhancement of financial advisors’ ability to manage clients’ portfolios continuously. This ongoing management leads to better long-term financial outcomes by ensuring that investments are always aligned with the clients’ goals and market conditions. Fintech tools also allow advisors to efficiently identify opportunities for tax optimization, enabling their clients to save more and grow their wealth more effectively. Moreover, real-time data access and analysis empower advisors to make informed decisions quickly, providing their clients with the best possible financial strategies. Upcoming initiatives, particularly the United States’ Consumer Financial Protection Bureau (CFPB) finalizing the Section 1033 rule this fall, will enable consumers and small and medium-sized enterprises to have the legal right to share their balance and transaction information from any and all of their Regulation E debit and Regulation Z credit accounts.