FinTech Scotland, a market-led initiative with broad support in the country, presented its 10-year roadmap in early March to accelerate the adoption of fintech excellence in the country.
The report, supported by industry, academia and regulators, has designed an action plan for how industry and regulators should work together to achieve the goals set out in this report over the next ten years.
The four priorities are open finance, climate change, payments and financial regulation.
The first priority is to move from an open bank to an open financial economy. Financial data is personal and business information created when people purchase and use financial products and services. For example, current account payments and transactions, savings, mortgages, investments, and pensions create financial data. It is captured, stored and managed by financial services companies. Open banking data is generally limited to current account payments only.
There are now several UK government-led initiatives that could pave the way for open finance, including the development of the National Data Strategy, Smart Data Review and the Pensions Dashboard. According to the report, the key to a successful move to open finance is providing a consistent and standardized framework to unlock data securely.
The report states that open financial data will create more opportunities by applying emerging technologies, which will result in new data-driven innovations, the emergence of new business models, and a significant improvement in customer engagement and companies with the financial services sector.
“Open Banking has advanced the way things are done in banking, but Open Finance will help us create and advance the digital economy,” said Derek Smith, head of digital engineering at Virgin. Money.
The three areas where the report predicts open finance can be applied first are everyday personal banking and business banking, long-term savings and investments, and personal and business insurance.
But participants in this report stressed that as the potential of open finance unfolds, more common data and privacy standards are needed. At the same time, there is a need to explore and test data anonymization techniques.
Along the same lines, another area that needs further research is how to design fair and transparent data sharing principles and ethical ways to combine different data sets. This includes the use of synthetic data and its potential to support innovation while limiting potential risks to data privacy and cybersecurity.
Data interoperability and standardization are key to moving from open banking to open finance, as this can also include public institutions. According to the report’s authors, some technical hurdles could be overcome, but more could be done at the UK regulatory level to enable greater standardization.
Another focus of the report is how to improve financial regulation to enable fintechs to thrive without imposing unnecessary demands on companies. Although UK regulation has been very progressive so far with the adoption of open banking rules, the report suggests that there are still areas where regulatory compliance compliance and regulatory risk management often require expertise. depth and can be a barrier for new FinTech entrants.
“We support 11 different industry sectors – all with different regulations – so it is essential for us to simplify compliance processes to adhere to these different regulatory regimes.” Robert McKenchie, Product Manager, Equifax UK
The report proposes, as next steps, to simplify compliance, for example by enabling sandboxes to take advantage of RegTech innovation and design digital regulations. The latter would allow regulators to collect information almost in real time to better monitor the financial markets and move from a position of reactive supervision to preventive interventions.
Read more: UK government report: FinTech needs investment, sandboxes and skills training