Open finance is key to making the UK a global leader in fintech and unlocking more public listings, the boss of a government-backed industry hub has told City A.M., as the sector struggles to lure investors.
Ezechi Britton, chief executive of the Centre for Finance, Innovation and Technology (CFIT) said the UK needed to follow up on its progress with open banking to better compete with other countries.
“Where the UK leads, the rest of the world follows,” he said. “We saw that with open banking, where so many other regions have taken our standards and APIs, run with it and are now taking that next step forwards. We need to show that same level of leadership around open finance.”
Open finance broadly refers to financial institutions sharing and using data for the creation of new products to improve customer service.
Britton added that the concept could provide a much-needed boost to the UK’s fintech sector, which has suffered in recent years from higher funding costs, tumbling valuations and weak investor sentiment on high-growth, lossmaking business models.
“When customers are in a position to adopt new products, our innovative fintech companies are in a better position to win new customers, new businesses, get traction, scale up and achieve that unicorn status we continue to talk about,” he said.
“And all of this ultimately leads to new IPOs, more trade, more jobs and more inclusion… What this then does is create an opportunity for our fintechs to go global and export their services more easily.”
CFIT was launched in early 2023 on the recommendation of the government-backed Kalifa Review into UK fintech.
It has been estimated that open finance and personal data mobility could add £30.5bn to the UK’s GDP.
“That doesn’t even factor in inflation over the last couple of years – that number is almost certainly larger now,” Britton said.
CFIT has today published a report from its first coalition on open finance, setting out a strategy for better data sharing to improve outcomes for consumers.
The coalition was made up of more than 60 partners, including Citizens Advice, Experian, EY, the Financial Conduct Authority, HSBC, IBM, KPMG, Lloyds, Mastercard, Monzo and Revolut.
It released two “proofs of concepts” developed with Citizens Advice and HSBC respectively, showing how open finance could give tailored advice to 40 per cent more consumers facing financial difficulties and boost lending to small businesses that rely on manual underwriting.
Britton said there could be further use cases that the industry has not even considered yet. “What else could come out of this simply by virtue of saying we need to free up information beyond just the bank account data we hold today?”
CFIT’s report recommended the creation of a new body to develop a roadmap and long-term regulatory framework for open finance, as well as a commercial model to incentivise firms to securely share financial data.
City minister Bim Afolami commented on the report: “I’m delighted to see the progress that CFIT has made in unlocking secure data-sharing across the financial services ecosystem, and excited by the transformational impact this could have over the coming years.”