Globally, the traditional financial landscape as we know it will be radically changed with the advent of Open Banking and
In our previous article, we discussed the concept of Open Banking. In a nutshell, Open Banking is concerned with current accounts/transaction data and the sharing thereof with third parties to enable them to develop applications or services around such data, including payment mechanisms.
During 2020, the
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Screen scraping and Application Programming Interface ("API") technologies are the main technologies used to facilitate
Open Finance introduces benefits to customers and third parties, enhanced customer experience, enhanced credit scoring, new payments methods and greater levels of competition. It will also advance financial inclusion.- "Account Aggregation" is regarded as the leading benefit likely to arise from
Open Finance , as customers will most likely value "seeing all their financial relationships in a single view" to inform their financial decisions. - Survey respondents unanimously indicated that Fintechs are most likely to benefit the most from
Open Finance . - The
Open Finance benefits must be weighed up against its risks, including data privacy and cybersecurity concerns stemming from the large volumes of data that will be exchanged and aggregated by financial service providers in serving their customers. In addition, consumers may not be ready to adoptOpen Finance owing to the lack of digital literacy and consumer education.
The FSCA Paper provides 5 recommendations for
- consent and customer protection
The financial data generated and stored by financial service providers belongs to the consumer and not the institutions. As such, with informed consumer consent, their data can be shared with any licensed third-party financial service provider of their choice.
- dispute mechanisms
All stakeholders (including financial service providers, third party providers and consumers) should have the ability to raise and resolve disputes between the parties.
- standardisation
Open APIs that ensure interoperability, efficiency and usability for all participants in the
- commercial models
Financial service providers should share consumer financial data with third party providers at no charge with the commercial basis for doing so being left to the discretion of the relevant parties.
- protection of data
To address data breaches and misuse, a liability framework aligned to the Protection of Personal Information Act, 2013 should be introduced to hold financial service providers and third-party providers accountable. In addition, to address the misuse of data algorithms that could lead to unfair discrimination, providers should have a data ethics framework in place and be able to fully demonstrate their comprehension of data algorithms to regulators.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Prof.
ENSafrica
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