CFIT’s report says that open finance could push UK GDP by over £30 billion

The Center for Finance, Innovation, and Technology (CFIT) recently published a report involving open finance and the potential benefits that it could bring. According to the Center’s CEO, Ezechi Britton, open finance could boost the UK GDP by around ₤30.5 billion.

CFIT came to lead a major open finance coalition consisting of more than 60 finance partners to create the report. That included entities like Lloyds Banking Group, the FCA, Revolut, Mastercard, Monzo, Citizens Advice, FDATA, IBM, KPMG, Experian, EY, Iwoca, and others.

CFIT report identifies two important proof-of-concepts

According to Finextra’s interview with Britton, the findings that CFIT had reported are linked to two proof-of-concepts. The first one is that open finance can provide more SME lending. CFIT explains this by saying that a pilot with HSBC UK demonstrated that accessing new datasets and auto-populating business loan applications could significantly increase SME lending decisions.

CFIT also said that a quarter of businesses from a sample — including SMEs whose loan applications were referred for manual underwriting — could receive access to finance if open finance was in place. Instead, many failed to access it, and some have even given up on their applications, which is something that could also be reduced significantly with open finance.

The second of the two key findings revolves around the dashboard with Citizens Advice. Commenting on this, Britton said: “Increasing the automation of manual processes, debt advice agencies would be able to support more people in dealing with financial problems.” According to the report, open finance could allow another 150,000 people per year to get much-needed advice.

Open banking needs three new bodies

The two proof-of-concepts are also being shared with fintechs and financial services industries in the UK in order to present them with the state of things and provide them with the data needed to start building prototypes.

Not only that, but they also identified new use cases of pensions and retirement, savings, and investments, as well as Digital ID and cash flow management. Britton highlighted multiple recommendations from the report, such as developing the mentioned case studies and building a precise roadmap for open finance. He believes that right now, the important thing is to identify a commercially viable approach to incentivize participants to share financial data.

The report also recommended creating three different bodies, which Britton explained by saying that it is necessary to create and empower an accountable body in order to advance open finance. Right now, there is a lot going on involving JROC and open banking, but it is also necessary to think of the future and create a home for open finance in it.

Another recommendation is to create a consent and authentication working group as the second body, although this is something that several government departments have been working on already. As for the third and final body, the report recommends establishing a task force that would focus on developing open finance APIs.

Open banking at the crossroads

Britton also said that he believes that the most important thing right now is to recognize that open banking is at a crossroads, which is why its development has stalled. Right now, industry players are considering how to move forward, and while there is a lot of focus on some very specific use cases, this is also extremely challenging.

Britton believes that it is important to take the next steps as an industry, rather than just wait for open banking. As for what kinds of steps, he said: “We continue to work with industry and work with Treasury to make these working groups and this task force a reality, to be able to take these proof-of-concepts forwards, and we’ll be continuing to work with all the various coalition partners to do that. Ultimately, it’s about working with our regional partners to demonstrate and roll out the value of open finance across the UK.”