Open finance is the next stage for Open Banking adopters

Adoption of Open Banking has been driven by remote working and increasing audit quality scrutiny over the past two years. Highlighted by the 5 million open banking users milestone reached in February this year.

Despite the acceleration of open banking adoption, it remains a relatively new concept (first mandated in the UK in 2018), putting

banking data in the hands of businesses and consumers, this is just the tip of the iceberg compared to open finance.

 

Open finance has the potential to give consumers and businesses unparalleled control over their data, across the whole financial services ecosystem, rather than just the banks mandated under Open Banking. In turn, for auditors and more broadly accountants the opportunity to generate more value for clients through real-time visibility on cashflow to preform higher quality risk assessments and specifically for auditors, improving efficiency & quality of audit procedures.

What is open finance?

 

Open finance goes one step beyond open banking, which uses third-party APIs to pull together banking data across a range of different providers.

By comparison, open finance allows users to fully take control of their finances by using APIs to centralise all of their financial information in one place. Sourcing data from a broader range of financial services ecosystem including pensions, insurance and investments. Through the use of an Open Banking Provider auditors & accountants can then also tie into this improved visibility of a clients assets.

How will open finance impact accountants?

 

Open finance will help accountants perform a more value-adding role, rather than just focusing on compliance.

Having complete visibility of finance through open finance tools will allow accountants to switch suppliers so that businesses are making cost-effective and relevant purchases. For example, this could include renegotiating business insurance so that it provides adequate coverage.

Additionally, accountants in practice will be able to continue their shift to advisory services by making it fast and easy for clients to access loans by using open finance to automate data collection and generate funding options at the click of the button.

The centralising of data collection will also save significant time when completing self-assessment returns for clients. These tasks typically require collecting financial data from a number of different sources (ie pensions, personal savings accounts, and share trading platforms) but being able to pull in all of this information from one data source will help speed up the time it takes to complete tax returns and ease client relationships by not having to chase them.

Similarly, auditors will be able to validate transactional and supporting data instead of relying on paper audit trails and frequent requests to busy clients. One particular use case is crypto wallets.

Coinbase’s API means that it is now possible for auditors to use tools to validate clients’ digital assets directly from the exchange. It will likely serve the needs of a growing number of businesses that are now accepting bitcoin as a payment method. This is similar to how auditors are using Open Banking to confirm clients’ bank balances directly from the bank.

Conclusion

 

We are still very early in the rollout of open finance services, but policymakers and regulators are in listening mode (the FCA recently published feedback on their call related to input on open finance), and a UK wide Pensions Dashboard (centralising information from providers) is due to be introduced from 2023. Beginning with Open Banking is the natural first step, especially for audit teams who are feeling the busy season strain, immediate efficiencies can be secured within a comfortable and client friendly environment.

Watch this space!

 

Author – Alex Aubrey

Company – Circit

Title – UK Country Manager

Email – alex@circit.io