New open finance guidelines aim to boost financial inclusion

November 20, 2024

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

Alongside investments in digital public infrastructure and continued efforts to reach the 1.4 billion people around the world who still lack access to a basic transaction account, open finance can be the next frontier for growth of the financial services sector. 76% of the world’s population now has access to a financial account and open finance can expand its use and increase the benefits customers receive from financial services.

Her Majesty Queen Máxima, Special Advocate to the United Nations Secretary-General for Financial Health (UNSGSA), said that as open finance becomes more prevalent, there is an opportunity to shape it in a way that benefits all, especially to those who have until now been excluded. financially excluded or underserved.

“While we have made great progress in expanding access to financial accounts, much more needs to be done to ensure that individuals actively use and benefit from a broad range of financial services that meet their complex financial needs, including including savings and insurance products,” said the UNSGSA Queen. Maxim. “With appropriate data and consumer protections in place, open finance can play a transformative role in deepening financial inclusion and improving the financial health of consumers. »

“Open finance done right could be a game-changer, bringing financial services to people who traditionally don’t have access to them,” said Ajay Banga, President of the World Bank Group. “It could also be a boon for small businesses. We are working with countries to promote open finance and help us achieve our goal of providing capital to an additional 80 million women entrepreneurs who currently have little access to it.

In an open financial system, the customer can give consent to a financial institution to share their data with other financial institutions without the need for 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 makes it easier for customers, including women and micro and small enterprises (MSEs), to compare and choose financial service providers and products, selecting those that best suit their individual needs.

Open finance may also introduce new or increased risks. As more data is exchanged between financial sector providers, there are increased security, data protection and privacy risks for consumers. The high-level guidelines therefore call on public authorities to adopt an approach that balances consumer protection and the promotion of innovation.

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

Bank for International Settlements Managing Director Agustín Carstens said: “Open finance holds great promise for fostering innovation and competition, empowering customers and improving financial inclusion. But benefits can only be achieved if accompanied by adequate regulation and safeguards. This joint effort to define key open finance considerations will contribute to the design and implementation of robust frameworks.

Known as “Key considerations for open finance“, the development of these guidelines was led by CGAP in collaboration with the BISthe International Monetary Fund (IMF), the Office of the Special Advocate to the United Nations Secretary-General for Financial Health (UNSGSA), and the World Bank.

Contacts:

World Bank

Lamis Daoud

+1-202-848-6103

[email protected]

IMF

Pemba Sherpa

+1-202-288-0651

[email protected]