The sanity of crowds – Can smart data initiatives transform consumer finances?

While open banking is not a new concept, regulatory developments, technological improvements and behavioural changes suggest a greater chance for achieving the much-promised potential.

With regard to regulatory change, a patchwork is emerging with the European Union, Australia, Singapore, the UK and the US all actively pursuing initiatives in the space. We outline these developments below, but it appears that there is an opportunity for regulators to engage multi-laterally to develop either common standards or regimes which will dovetail in such a way to reduce frictions for consumers transacting across borders and make it easier for innovators to work across borders. For consumers at least, in the area of cross-border payments, there is both the regulatory will (as can be seen in the Financial Stability Board's roadmap on enhancing cross-border payments) and payment services consumer demand.

Europe

The EU took its first formal step towards open finance in June 2023 with a proposed Financial Data Access Regulation (FiDA), building out from the Second Payment Services Directive (PSD2) which allowed third-party payment service providers to access information about payment accounts maintained by other institutions and facilitated the introduction of open banking in 2018. FiDA will generally apply to financial institutions and to the newly introduced Financial Information Service Providers (FISPs) – entities that have obtained an authorisation from a competent authority to provide financial information services which involve accessing customer data. The framework will allow, subject to an individual customer's consent, access to data on mortgage credit agreements, loans, savings, investments in financial instruments, insurance-based investment products, cryptoassets, real estate, and related financial assets, including pension rights. However, more sensitive information, like data related to sickness and health insurance products will be excluded.

FiDA also presents new data-sharing tools, including a dashboard which will allow customers to manage their data permissions in real time, and arrangements for entities to agree 'rules of the road' such as contractual standards, access arrangements and even costs (known as financial data sharing schemes). Currently, FiDA is in the proposal stage; it is expected to be applicable from 2027.

Australia

Australia's Consumer Data Right (CDR), modelled on the UK open banking approach, has been in place since mid-2020. The CDR was rolled out in phases to sectors and within sectors – initially covering banking (with different product sets also rolled out in phases) and then moving on to the energy sector. The non-bank lending sector will follow in 2026. The focus of the CDR to date has been on consumer’s access to, and sharing of, their data with accredited third parties and the consents relating to that access. However, the government is now considering other use cases for open finance such as action initiation – whether to conduct actions on behalf of the consumer (such as to switch energy providers, or to obtain financing approval) or, indeed, to instruct a payment.

There has been wide-spread criticism of Australia’s CDR regime. A report commissioned by the Australian Banking Association and published in July 2024, found that A$1.5 billion had been invested in by the banking community since 2018 to operationalise the CDR yet, as at the end of 2023, only 0.31% of banking customers had used the right.

This has resulted in the government committing in late 2024 to reset the CDR regime. It is committed to reducing the cost of compliance for industry participants, lowering the barriers to adoption for consumers to increase the uptake in existing CDR sectors and increasing the use cases. Despite this, many in the industry remain sceptical that it will achieve what it was initially envisaged to do.

Singapore

Singapore is not new to open banking. As early as 2016, the Monetary Authority of Singapore (MAS), together with the Association of Banks (ABS) in Singapore, had developed and published an API playbook to set data and information standards in order to facilitate open banking. More recently, open banking has also been utilised in Singapore on a very large scale in the form of the Singapore Financial Data Exchange (SGFinDex), which pulls together and allows the customer to consolidate his financial information across different government agencies and financial institutions.

A joint initiative by MAS, Government Technology Agency (GovTech), Smart Nation Singapore, and various financial institutions, SGFinDex was first launched in December 2020.

This is in fact the world's first public-private-partnership in building a public digital infrastructure, that is underpinned by a national digital identity and online consent framework, to help persons manage their finances holistically. For instance, a user can access his bank's online portal and, via SGFinDex, obtain a fuller picture of his financial assets as SGFinDex pulls data from financial institutions (such as the user's banks, insurers and the SGX Central Depository) and government entities (such as the Central Provident Fund Board, the Housing and Development Board, and the Inland Revenue Authority of Singapore).

While the financial information available to the SGFinDex is currently still largely limited to information from banks and insurers, it remains to be seen whether the SGFinDex will be expanded in future to include other types of capital markets services providers, fintech companies and payments companies.