Open Finance is a new phenomenon around data and service sharing amongst financial institutions and other entities to enable of distribution of banking services. In this article below, penned by Ajith Thadhani (AVP-Global Sales & Business Development, Estel Technologies), we look at how Open Finance is the next step on the Open Banking agenda. Link to the article: https://bit.ly/3rJSzA1

1. Open Finance
Introduction
The banking and financial services domain is transforming into a more fragmented and
modularized structure. Industry gurus believe this transformation is here to stay. They
believe swift adaptation of this phenomenon is critical to identify the implications on
business models and alignment of strategic response. New technology is making it easier for
customers to buy from multiple product providers. The number of financial products used by
the average customer is increasing. This is called modularized pulled demand.
This modularization has forced both the incumbents or traditional FI’s and new entrants or
Fintech FI’s to collaborate with each other to cater to micro-segments. This fragmentation
has cracked all forms of entry barriers to new players and tech giants to grab a substantial
share of the pie from large traditional players.
What is Open Finance and Its Ecosystem
Open banking has set the pace for enterprising differentiations within the financial services
ecosystem. Amidst these latest developments, industry gurus and regulators are drawing
emphasis to the data-driven financial ecosystem. Sharing data formulates the basis of
creating an indistinguishable battlefield amongst the service providers.
Whilst banks are not yet to consider where they will play in the open data economy, tech
companies are marching ahead to grab the opportunities open data economy has to offer. For
instance, companies such as WeChat, Grab, GoJek, Jio & Tink have exploited the
opportunities open data economy has to offer.
Open finance brings together a host of new players and service providers other than banks &
FI’s to the finance ecosystem by virtue of sharing data. Telcos, tech giants, microfinance
entities, eCommerce, utility providers, rating agencies, realtors, government entities, super
apps and SMB’s are exploring avenues to jointly enlarge their ecosystem through
collaboration.
The open finance phenomenon is based on if all entities are willing to share respective data,
the consumer doesn't have to collate information from various data sources to avail financial
services from respective financial asset creators. Typically the real value of data is derived
through a combination of data sets collated from various sources, e.g., if a customer is willing
to purchase a handset from a telco e-commerce portal, this experience can be made

2. Open Finance
seamless, provided telco can avail customer’s digital KYC, credit rating, financial history,
handset supplier information and FI’s to offer a hire-purchase offering, thus telco can in
real-time offer the customer a hire-purchase plan, i.e. BNPL option.
Fig: Our model maps how Open banking & Open Finance Ecosystems can generate value for everyone
Drivers of Open Finance
With the rapid influx and emergence of Third Party Providers (TPP’s) entering into the
financial ecosystem offering services such as Wealth Management, Investment plans, Mobile
Money, Digital Currencies, FOREX, Insurance, Remittance, SuperApps, payments, Credit
Decisioning, and budgeting, as a result of these TPP’s the financial ecosystem has stretched
its capabilities of service innovation and co-creation.
Digital Native Customer - Gen Y and Gen Z customer segments are the most Digital
Savvy generations compared to any previous generation. By nature these customer segments
expect any service to be delivered in digital form as opposed to otherwise. These customer
segments expect seamless service delivery on their smart devices or even IoT devices. In
addition, it is vital to prompt these customers with the most attractive & personalized deal at
the most appropriate time. With rich and more contextual data at disposal, the open finance
ecosystem is able to create unique and personalized deals;
https://www.dealwise.app/en/index.html

3. Open Finance
Partnerships & Collaboration is the Mantra
Open finance addresses the challenges of
data fragmentation by providing a secure
and efficient means for customers to
allow businesses to share and use
customer data across a common
framework. A freer exchange of data can
let in new competitors and encourage
innovation.
Platform API economy has paved the
fundamentals for FI’s, Tech giants,
service providers, SMB’s eCommerce
players to relook at the way of
distribution. Every organization today
focuses on digital distribution, due to its inherent benefit of reaching the customer through
opti-channel & seamless experience. Partnership and collaboration enrich silos of data held
by individual entities into more unified, augmented, and complementary data for services
provided to create personalized products and services.
● Combine Personal Financial Management (PFM) with other data sources to provide
more accurate value propositions. Predominantly PFM applications analytics and
predictions are on limited payments data which only allows consumers a narrow
financial view. Open finance can contribute to these PFM by adding other data
sources beyond transactions to create more personalized propositions.
● Creates a more cohesive conducive and collaborative ecosystem between FI’s, Tech
companies, Regulator and Businesses. An open finance ecosystem will facilitate the
fabrication of more compelling value to all stakeholders equally creating more
opportunities for cross-sell and upsell to a more relevant target micro-segment.
● Unified and Unique Pension Schemes, Open Finance will enable various social
security, pension schemes, or other welfare funds to share silos of data sets to unify
the plans using a common KYC, thus facilitating the ecosystem to co-create more

4. Open Finance
unified plans customized products and services along with more refined
customer-worth.
Impact on traditional banking
With Fintech and Non-Banking digital players embarking into the financial services market,
which historically was limited or dedicated to banks, this landscape of the financial market
has changed rapidly over the last years. In this context, traditional players are forced to
relook at their strategy. With Fintech’s agile technology capabilities and swift turning around
of services, the traditional banks will face challenges within to keep abreast with the market
dynamics.
Fig: Fintechs originating in each region by total amount & in selected categories
Fintech’s Role in Open Finance
We believe with its inherent nature, Fintech’s role in Open Fiance will be to act as the
“service curator” orchestrating the innovative service propositions to end users in
conjunction with the other stakeholders. Fintechs will add great value to FIs in FI’s service
distributions whilst consuming data from other counterparts within the ecosystem.
Fintech players will also enrich the UX by stitching a connected seamless experience by
consuming Open APIs provided by the ecosystem participants, which in turn provide

5. Open Finance
valuable insights to the whole ecosystem to create more personalized products and services
for cross-sell - Up Sell.