Red flag stuck in a map of the UK signifying London.
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Open Finance presents huge use case benefits to the British economy and the country has established some solid building blocks to grasp these opportunities, according to Innovate Finance.

However, the fintech trade body believes there is still work to be done if the UK is to secure the additional £30.5bn to its economy that Open Finance presents. 

In a new report, Innovate Finance CEO Janine Hirt and KPMG’s Open Finance Lead Ellie Hewitt mapped out which steps they believe Britain should take, having already established itself as one of the global leaders in Open Banking.

“The global trend towards Open Finance is clear, and it is crucial that the UK takes the right steps now in order to set up for future success,” the duo asserted.

Open Banking has already taken off in the UK in a big way, with the country’s leaders asserting, and Innovate Finance agreeing, that the country has secured a leadership position. 

The UK was the first country to introduce Open Banking, which now has nine million active users, and the fintech sector underpinning this is vast, stretching far beyond the capital of London to other cities such as Manchester, Birmingham, Glasgow, Cardiff and Belfast.

Likewise, the report noted that the use of smart data is prevalent in the UK, although this has also been accelerated in other nations like Australia, Brazil and Singapore, as well as in the EU. 

The UK’s efforts in this area are best demonstrated by the activity of the Department of Business and Trade’s Smart Data Council, whilst the Data Protection & Digital Information (DPDI) Bill is making its way through parliament.

Several commentators have remarked on the necessity of the UK maintaining its leadership position, such as John Penrose MP at Pay360 last month. Hirt and Hewitt asserted that a ‘clear strategy and deliberate action’ is needed for the UK to stay strong on its path to Open Finance leadership.

They continued: “Open Finance spans more than just Open Banking or smart data – it is a holistic, dynamic, and multi-faceted opportunity, that requires equally holistic, pan-industry response to maximise its potential. 

“A successful rollout therefore requires close collaboration between key stakeholders across public and private sectors: government, regulators and industry players.”

The Future of Payments Review, authored by former Nationwide CEO Joe Garner, was published last autumn and is laying the foundation of a National Payments Vision – although a forthcoming election could offset the momentum or change the direction of this strategy.

In Hirt and Hewitt’s view, there are some additional stepping stones the UK must clear within this strategy, including the area of consumer protection, one of the main areas of focus in Joe Garner’s review.

Innovate Finance and KPMG highlighted a need for adequate and appropriate purchase protections for Open Finance to build customer trust and encourage adoption, whilst a dispute mechanism is also necessary.

On the topic of trust, customers also need reassurance that their data will be protected and used safely. Given that Open Finance goes one step further than Open Banking to utilise customer data across the financial ecosystem, this is essential.

The government must also build on Open Banking’s initial introduction to the UK as a regulatory mechanism to ensure transfer to a more commercial network. Interoperability in general is an area authorities and financial institutions should assess according to Hewitt and Hirst, both on a national and global scale.

Lastly, the duo have identified digital identity – a concept under evaluation in the UK, EU and elsewhere – as a potential cornerstone to Open Finance by enabling secure access to customer data.

“The momentum behind Open Finance in the UK is clear,” the report concluded. “While the various initiatives and building blocks already underway will continue to iteratively evolve, we encourage legislators, innovators, and industry participants to come together and engage to progress a pathway forward.

“Undoubtedly, Open Finance represents a huge area of opportunity for the UK, and we look forward to working with stakeholders across the industry to engage, prepare, innovate, and grow.”