To begin with, the technological field has known for years the ongoing evolution of Open Innovation by means of open APIs (Application Programming Interfaces), meaning digital gates making different companies’ products and services communicate with each other. Sure enough, mutual interconnection via open APIs allows companies to form an accurate API ecosystem, combining the digital services offered by multiple companies.

We define an open innovation model as laying poles apart a traditional process of business innovation, commonly structured within the company. Indeed, open innovation is built on the notion of business’ evolution through ideas’ development both inside and outside the company, which means involving universities, start-ups etc. briefly speaking, it encourages to open up externally.

In current scenario, this open innovation model is first translated into an Open Banking model, where banks share clients’ financial information either mutually and with third parties, in order to develop innovative products and services.

Down this road, the development of open APIs led to a new trend shaping: Open Finance.

Open Finance is the implementation of an Open Innovation model to financial and insurance services, therefore extending the impacts of open APIs in finance.

Recently, Covid-19 pandemic has carried a strong and rapid need for digitalisation within the entire financial sector, and with customers’ needs changing in favour of a real aggregation between financial services and other product types, market players have found themselves in the position to accelerate the process.

Consequently, open finance is the evolution of open banking, and will be leading to a paradigm shift towards a 360° open innovation model applied to the overall financial world, including all sorts of financial services, from asset management to financial brokerage etc. For this reason, it is set to transform the financial sector in the long term.

Transparency for both providers and customers

The implementation of an open finance ecosystem will enable providers to deliver improved customer experiences thanks to an easier process of mutual information sharing and therefore their service offerings.

It will introduce fiercer competition, widen the marketplace with new and disruptive entrants and encourage more innovation amongst traditional players.

Moreover, by securely and efficiently aggregating customer data, providers will have a more comprehensive vision of a customer’s financial situation, this way offering more tailored advice and solution.

On the other hand, customers will benefit from a deeper level of personalisation of products and services that are more suitable to their overall profile and requirements, also due to a holistic picture of a customer’s financial position.

They will have a better understanding of their financial position and improve their financial wellbeing. Also, the possibility to compare price and service features and switch providers, this way improving competition within the field and ensuring to get more value from their provider. Finally, customers will take advantage of fairer pricing and more financial inclusion.