Open Finance provides opportunities for fund distribution
On 24 October 2022, the EU Expert Group on European Financial Data Space has submitted its Open Finance Report to EU Commissioner Mairead McGuinness.
Open Finance is an advancement of Open Banking aiming to provide shared access to financial data in the EU including data from financial services customers and from the public sector. The initiative is intended to enable all market participants to access and share this data to provide a broad range of financial services. Thus, the EU wants to promote innovative financial products and services. Consumers and corporates should have the opportunity to receive even better advice and personalised services.
In its report, the expert group, in which BVI is representing the European asset management industry, proposes options for data sharing illustrated by several case studies. Furthermore, the expert group outlines the key components for an open financial ecosystem in the EU. Technically, the data should be made available to the market via open interfaces on a standardised basis.
Open Finance can deliver benefits in financial advice. With access to client data, advisors would be able to tailor their recommendations even more specifically to their clients' individual needs.
Of course, clients' consent to release their data must meet high standards. Open Finance will only be able to operate efficiently if clients trust in the share of data. It must be ensured, that access to data will be limited to the agreed purpose and that data and consumer protection will be guaranteed.
At the same time, Open Finance must be grounded on a level playing field, i.e., equal and fair access to data. To avoid any competitive distortions, it is important to draw a sharp line between the original customer data and the data refined by the companies, such as results of risk assessments, suitability, and adequacy tests.
It is also essential to standardise data exchange to prevent financial companies and customers from high additional costs. Therefore, the BVI advocates the deployment of ISO standards - such as the LEI - to identify parties and transactions. Using a holistic data model (CDM) would further promote this development.