Global Organizations Launch Open Finance Guidelines to Advance Financial Inclusion
A coalition of international organizations has unveiled high-level guidelines to assist governments in leveraging open finance to enhance digital financial services, drive innovation, and broaden access to diverse financial products.
These efforts align with ongoing investments in digital public infrastructure and initiatives to address the financial exclusion of 1.4 billion people worldwide who still lack access to basic transaction accounts. With 76% of the global population now holding a financial account, open finance presents an opportunity to expand financial access and improve the value customers derive from financial services.
Aiming for Inclusive Growth
Her Majesty Queen Máxima, the United Nations Secretary-General’s Special Advocate for Financial Health (UNSGSA), emphasized that open finance could play a transformative role in addressing the needs of underserved populations.
“While strides have been made in democratizing access to financial accounts, much more needs to be done to ensure individuals actively benefit from a wide range of services tailored to their financial needs, such as savings and insurance,” said Queen Máxima. “With appropriate safeguards, open finance can significantly promote financial inclusion and improve consumer financial health.”
Ajay Banga, President of the World Bank Group, highlighted the potential of open finance to bridge gaps in access to capital, especially for women and small businesses. “If done right, open finance can be a game-changer, democratizing access for people who have never had financial services before. It could also provide a lifeline to small businesses, particularly women entrepreneurs,” Banga noted.
How Open Finance Works
In an open finance system, customers can authorize their financial institutions to share data with other providers, bypassing the need for bilateral agreements. This reduces information asymmetry, fosters competition, and encourages the development of innovative products and services. The system particularly benefits women and micro and small enterprises (MSEs) by simplifying the process of comparing and selecting financial providers suited to their specific needs.
Addressing Risks and Challenges
While the benefits of open finance are significant, it also introduces risks related to data security, privacy, and consumer protection. The newly launched guidelines urge public authorities to strike a balance between promoting innovation and safeguarding consumer interests.
Kristalina Georgieva, Managing Director of the International Monetary Fund, cautioned against potential challenges in ensuring competition. “The entry of new players can spur innovation but may also create regulatory challenges. Policymakers must monitor ecosystems closely to ensure they meet policy goals,” she stated.
Agustín Carstens, Managing Director of the Bank for International Settlements, echoed the importance of regulation. “Open finance offers great opportunities for innovation and inclusion. However, its benefits depend on robust regulatory frameworks and safeguards,” Carstens said.
Developing the Guidelines
The guidelines, titled “Key Considerations for Open Finance,” were collaboratively developed by the Consultative Group to Assist the Poor (CGAP), the Bank for International Settlements (BIS), the International Monetary Fund (IMF), the UNSGSA, and the World Bank.
These recommendations provide a blueprint for governments to foster innovation while ensuring consumer protection and the responsible use of financial data.
For more information, refer to the original guidelines and consult the authoritative version in its original language.
