The new guidelines for open financing are aimed at stimulating financial accessibility

The new guidelines for open financing are aimed at stimulating financial accessibility

November 20, 2024

Washington, DC – November 20, 2024: Today, a coalition of international organizations released high-level guidelines for public authorities seeking to use open finance to accelerate digital financial services and innovation, and expand the use of a wider range of financial products.

Along with investments in digital public infrastructure and ongoing efforts to reach the 1.4 billion people worldwide who still lack access to a basic account for transactions, open finance could be the next frontier for the growth of the financial services industry. 76% of the world’s population now has access to financial accounts, and open finance can expand their use and increase the benefits customers receive from financial services.

Her Majesty Queen Maxima, the UN Secretary-General’s Special Advocate for Financial Health (UNSGSA), said that as open finance becomes more widespread, there is an opportunity to shape it in a way that benefits everyone, especially those who have not yet was financially excluded or underserved.

“While we have made significant progress in increasing access to financial accounts, there is still much work to be done to ensure that people actively use and benefit from a wide range of financial services that meet their complex financial needs, including savings and insurance products,” said the Queen UNSGSA. Máxima. “With the right data and consumer protections in place, open finance can play a transformative role in deepening financial access and strengthening consumer financial health.”

“Open finance, if done right, can be a game-changer, bringing financial services to people who have traditionally had no access to them,” said World Bank Group President Ajay Banga. “It can also be a boon for small businesses. We are working with countries to promote open finance and help us achieve our goal of bringing capital to an additional 80 million women entrepreneurs who currently have limited access to it.”

In an open financial system, a client can give consent to a financial institution to transfer their data to other financial institutions without bilateral contracts. This reduces information asymmetry between institutions and promotes a more competitive market for the emergence of new and innovative products, services and business models. This enables customers, particularly women, micro and small enterprises (MSMEs) to more easily compare and select financial service providers and products, choosing those that best suit their individual needs.

Open financing can also introduce new or exacerbate risks. As more data is shared between providers in the financial sector, data security, protection and privacy risks are increasing for consumers. The high-level guidelines therefore call on public authorities to adopt an approach that balances consumer protection and innovation promotion.

“The arrival of new financial players can spur innovation and competition, but it also creates regulatory challenges,” said IMF Managing Director Kristalina Georgieva. “Competition could be threatened if dominant players from other sectors have access to financial data without sharing their own. Government agencies will need to monitor the ecosystem closely to ensure that it meets policy objectives.”

Bank for International Settlements CEO Agustín Carstens said: “Open finance has great potential to foster innovation and competition, empower customers and improve financial access. But the benefits can only be reaped with proper regulation and safeguards. This collaborative effort to outline the key considerations for open finance will contribute to the development and implementation of robust frameworks.”

Known as “Key considerations for open finance“, led the development of these recommendations CGAP in cooperation with BISInternational Monetary Fund (the IMF), Office of the Special Advocate of the UN Secretary-General on Financial Health (UNSGSA), and World Bank.

Contacts:

World Bank

Lamis Dowd

+1-202-848-6103

[email protected]

the IMF

Pemba Sherpa

+1-202-288-0651

[email protected]