Exploring Risks and Consumer Trust in the Shift from Traditional to Open Finance
06.11.23 1:15pm - 50m
Does open finance always lead to consumer empowerment? What if you’re poor? What if you’re already vulnerable? What if your data is misused? This session will examine these questions and more through a parallel thinking methodology.
Open finance ecosystems have been viewed in the past decade as potential answers to solve inclusion challenges- they can break the hegemony of traditional financial institutions, enable competition between incumbents and entrants, lower costs for consumers and help offer more personalized services based on consumer data trails, and innovative business models can help deliver services to hitherto excluded consumer segments at a fraction of the costs incurred by more traditional players. Open ecosystems in financial services are designed to make things simpler, faster, and more convenient for consumers.
However, the transition from traditional finance to open finance ecosystems is not without its pitfalls and complexities, as it introduces new risks that may undermine consumer confidence. In emerging markets and developing economies with weak regulatory frameworks in areas such as data sharing protocols, data protection, and consumer rights legislation, the shift towards open finance can be fraught with danger. In more regulated markets like the UK, where legislation specific to open finance exists, trust remains a significant issue. For example, research has found that about 84 percent of users did not trust open banking, signaling deep-seated concerns about security and the potential for harm. The novelty of these ecosystems, coupled with a lack of understanding and transparent regulations, may further exacerbate consumers' mistrust, creating barriers to adoption and potentially leaving more vulnerable individuals unprotected.
Join us to explore the risks, opportunities, and co-develop potential solutions to make open finance more responsible.