The financial services industry is witnessing a fundamental shift in how products are built, delivered, and experienced. At the heart of this transformation lies open finance—a paradigm that enables secure, consent-driven data sharing between financial institutions and third-party providers. This article explores how fintechs use open finance to build better products that are more personalised, accessible, and efficient than traditional offerings.
Open finance represents the evolution of open banking, extending beyond bank account data to encompass pensions, investments, insurance, and other financial products. By leveraging standardised application programming interfaces (APIs) and customer-permissioned data access, fintechs are creating innovative solutions that address longstanding pain points in financial services.
Throughout this comprehensive guide, we will examine how fintechs use open finance to build better products across lending, payments, personal finance management, and other key areas. We’ll explore real-world implementations, regulatory frameworks driving adoption, and the tangible benefits for consumers and businesses alike.
Whether you’re a fintech professional seeking to understand the competitive landscape, a financial institution exploring partnership opportunities, or a consumer curious about how your financial data can work harder for you, this article provides actionable insights into one of the most significant trends reshaping financial services.
Understanding Open Finance and Its Core Principles
What is Open Finance?
Open finance is a framework that allows consumers and businesses to securely share their financial data with authorised third-party providers through standardised APIs. It builds on the foundations of open banking but encompasses a broader range of financial products and services.
The key distinction lies in scope. While open banking typically focuses on payment accounts and transaction data, open finance extends to savings accounts, credit cards, mortgages, pensions, investments, and insurance policies. This comprehensive view enables fintechs to gain a more complete understanding of a customer’s financial situation.
Consent-Driven Data Sharing
The cornerstone of open finance is explicit customer consent. Under this model, consumers retain full control over their financial information. They decide which data to share, with whom, for what purpose, and for how long. This consent can be revoked at any time, giving consumers unprecedented agency over their financial information.
This consent-based approach represents a departure from traditional data silos, where financial institutions treated customer data as proprietary assets. In the open finance era, data portability empowers consumers to access better products and services across the financial ecosystem.
The Role of Standardised APIs
APIs serve as the technical backbone of open finance, enabling secure and standardised data exchange between different systems. These APIs define how data requests are formatted, authenticated, and transmitted, ensuring interoperability across the financial ecosystem.
Financial institutions implementing open finance must expose their customer data through standardised APIs that meet security and performance requirements. Third-party providers can then integrate with these APIs to access customer data with proper consent, creating innovative products and services.
How Fintechs Use Open Finance to Build Better Products
Understanding how fintechs use open finance to build better products requires examining specific applications across different financial services. The common thread is leveraging data that was previously inaccessible to create more accurate, personalised, and efficient solutions.
1. Revolutionising Credit Assessment and Lending
Traditional credit scoring models rely heavily on historical credit bureau data, which excludes significant portions of the population—freelancers, gig economy workers, recent immigrants, and those without established credit histories. Fintechs are using open finance data to address this gap through alternative credit assessment.
Alternative Data for Credit Decisions
Open finance enables lenders to access real-time income and cash flow data, allowing more accurate evaluation of non-traditional workers. This approach considers:
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Transaction history from multiple accounts
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Income patterns and stability
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Recurring expenses and bill payments
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Savings behaviour and financial discipline
AI-Enhanced Credit Decisions
The combination of open finance data and artificial intelligence is creating even more sophisticated lending solutions. Financial institutions can now:
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Assess true customer affordability beyond traditional credit scores
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Mitigate risks with greater precision
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Drive financial inclusion through more intelligent and personalised lending
Real-World Impact on Approval Rates
In markets where open finance has been implemented, fintechs have reported significant improvements in approval rates. By analysing payment history, rent, bills, and cashflow to assess creditworthiness independent of traditional credit scores, lenders are opening doors for consumers and small businesses that previously had limited options.
2. Frictionless Loan Processing and Verification
One of the most immediate benefits of open finance is eliminating manual document submission for loan applications.
Streamlining Income Verification
Traditional mortgage and loan applications require applicants to print, scan, and submit months of salary slips or tax documents. This process creates friction, delays approvals, and increases operational costs for lenders.
With open finance, consumers can simply click a button within their bank’s secure application, grant explicit digital consent, and allow the system to instantly verify their historical contributions directly from financial ledgers. The result is friction-free execution for consumers and optimised credit underwriting accuracy for banks.
Faster Decision-Making
Through open banking systems, adviser platforms can access transaction data directly rather than relying on manually exported statements, reducing friction in income verification and serviceability assessments. Income verification, expense categorisation and liability mapping can happen in minutes rather than days.
3. Embedded Finance Integration
How fintechs use open finance to build better products extends to embedding financial services directly into platforms consumers already use daily.
Meet Customers Where They Are
Rather than expecting users to migrate to a bank’s app or portal, fintechs are integrating financial products into the platforms where customers already spend their time.
This approach has gained significant traction in e-commerce platforms. Using transaction data from the platform, fintechs can underwrite loans for merchants without requiring them to visit a bank. For the merchants, the place where they sell becomes the place where they access financial services.
Employee Financial Wellness
Fintechs are partnering with HR software platforms to offer salary loans and bank accounts through employee apps. The customer never interacts directly with a banking interface; the financial service is embedded invisibly within a tool they use daily for work.
4. Hyper-Personalised Financial Products
Access to comprehensive financial data enables fintechs to deliver truly personalised products tailored to individual circumstances.
Categorisation and Insights
AI models can identify and extract relevant information from bank transaction data to classify each transaction. This categorisation capability powers products such as Personal Finance Management (PFM) and Business Financial Management (BFM), feeding downstream AI models that power payment and lending solutions.
Complete Customer View
Fintechs are transforming credit journeys by combining open finance and employment data into a single intelligence layer to read, categorise, and interpret enormous amounts of data. This approach delivers:
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Elimination of manual income proof and extensive forms
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Instant validation of employment data and financial history
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Re-engagement with previously rejected profiles
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360-degree view of customer financial behaviour
5. Personal Financial Management and Financial Health
Open finance enables comprehensive financial aggregation, giving consumers a complete picture of their financial health.
Consolidating Financial Information
Consumers can connect accounts from different institutions and view balances and transactions in one consolidated place. This central financial hub responds to customer demand for comprehensive financial visibility.
Holistic Financial Insights
Personal financial management allows individuals to aggregate and manage their financial information across multiple accounts for a more holistic financial view and personalised insights. This includes:
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Tracking spending across all accounts
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Setting savings goals
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Receiving personalised financial advice
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Identifying opportunities for better products
6. Cross-Border Payments and Remittances
Open finance is transforming international payments by enabling faster, cheaper account-to-account transfers.
Faster Settlement Times
Open banking payments can settle in as little as 2.5 seconds, dramatically reducing the time required for cross-border transfers.
Lower Costs
The benefits of open finance for payments are significant:
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Higher conversion rates for payment providers
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Reduced payment fees compared to card-based methods
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Lower chargebacks and improved margins
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Real-time settlement for better cash flow management
7. Banks Monetising Open Finance
An emerging trend is financial institutions monetising their data through open finance, creating new revenue streams while providing fintechs with valuable data.
Data Monetisation Infrastructure
Financial institutions are developing portals that enable them to monitor and measure data usage by fintechs and other third parties. These platforms provide:
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Visibility into which applications are accessing data
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Volume of requests per application
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Performance and uptime statistics for open finance APIs
Sustainable Data Economy
This trend shows how fintechs use open finance to build better products within a sustainable commercial ecosystem. As major banks begin charging fintechs for access to customer banking account data, the entire industry is considering how to participate in this new revenue stream.
Regulatory Frameworks Driving Open Finance
National Open Finance Mandates
Central banks and financial regulators worldwide are implementing phased Open Finance frameworks to empower customers to securely control and share their financial data with authorised third-party providers. These frameworks replace fragmented data sharing with centralised, consent-driven systems.
Phased Implementation
Regulators typically implement open finance in phases:
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Phase 1: Large banks with significant customer bases begin sharing transaction data
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Phase 2: Medium-sized institutions join the ecosystem
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Phase 3: Smaller institutions and other financial entities participate
Data Reciprocity
A key principle of open finance frameworks is data reciprocity: if an organisation joins the open ecosystem to consume financial data, they must be prepared to contribute their own data back into the network. This ensures a fair, sustainable data economy.
Cross-Border Open Finance
International bodies are developing prototypes designed to connect disparate open finance networks across borders. These projects enable cross-border data portability for individuals and small businesses.
Key Use Cases
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KYC and KYB data travelling across jurisdictions to speed up overseas account opening
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Trade finance streamlining through exchange of invoices, letters of credit, and shipping data
Technical Interoperability
Cross-border open finance projects do not seek to replace existing national infrastructure but to connect it—translating between different technical standards and linking trust frameworks across jurisdictions.
The Partnership Model for Success
Collaboration is essential for open finance success. Rather than building everything in-house, financial institutions are choosing to collaborate to move faster and deliver more value to customers.
This partnership approach enables fintechs to:
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Access established customer bases and financial infrastructure
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Leverage bank trust and regulatory compliance
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Scale innovation more quickly
Benefits and Challenges of Open Finance
Key Benefits
| Benefit | Description | Impact |
|---|---|---|
| Financial Inclusion | Access to data for non-traditional workers and underserved populations | Significant increase in approval rates |
| Friction Reduction | Eliminating manual document submission | Days-long processes reduced to minutes |
| Personalisation | Products tailored to individual circumstances | Hyper-personalised credit offers and solutions |
| Competition and Innovation | Lower barriers to entry for fintechs | More choices and better pricing for consumers |
| Cost Reduction | Lower payment processing fees | Substantial reduction compared to cards |
Challenges to Address
| Challenge | Description | Mitigation |
|---|---|---|
| Data Security | Protecting sensitive financial information | Standardised security frameworks, consent-based access |
| Interoperability | Different technical standards across jurisdictions | Projects connecting national infrastructures |
| Consumer Trust | Willingness to share financial data | Transparent consent mechanisms, clear value propositions |
| Regulatory Complexity | Varying requirements across markets | Industry collaboration, harmonised standards |
| Bank-Fintech Tensions | Disagreements over data access costs | Data monetisation frameworks |
Expert Tips for Fintechs Building Open Finance Products
1. Prioritise Consent Transparency
Success in open finance depends on consumer trust. Ensure your consent mechanisms are clear, simple, and give users genuine control over their data. Explain exactly what data you’re accessing, why you need it, and how it benefits the user.
2. Focus on Immediate Value
Consumers share data when they perceive clear value. Your first open finance product should address a tangible pain point—whether faster loan approvals, better interest rates, or simplified financial management. Early wins build trust for more ambitious products.
3. Build for Scale
Open finance products must scale effectively. Consent requests can grow dramatically as adoption increases. Design infrastructure that can handle dramatic growth without compromising performance or security.
4. Embrace Partnerships
The deliberate partnership model shows the value of collaboration. Rather than building everything internally, identify complementary partners that can accelerate your go-to-market and expand your capabilities.
5. Understand Regulatory Requirements
Open finance operates within clear regulatory frameworks. Stay informed about evolving requirements in your markets and ensure compliance from the outset. Consider engaging with regulators early to shape the ecosystem.
6. Invest in Data Quality
The quality of your open finance products depends on the quality of data you access. Invest in robust data processing, cleansing, and categorisation capabilities to deliver accurate insights and recommendations.
7. Design for Customer Experience
Open finance products should delight customers with intuitive interfaces and seamless experiences. Remember that behind every data consent request is a human being who needs to understand and trust your offering.
The Future of Open Finance
Cross-Border Data Portability
International projects represent the future of open finance: connecting national infrastructures into a global network. As different trust frameworks and technical standards are linked, consumers and businesses will be able to share data seamlessly across borders.
AI-Driven Personalisation
The combination of open finance data and AI will enable unprecedented personalisation. AI extracts more insights from data, enabling richer categorisation and more sophisticated product recommendations. This synergy will make financial services smarter, more personalised, and more powerful.
Expansion Beyond Traditional Finance
Open finance will extend to data from telecommunications, utilities, and government agencies. There is potential for integration with digital identity schemes, creating an interconnected data ecosystem that provides a complete picture of individuals and businesses.
Regulatory Evolution
As open finance matures, regulatory frameworks will evolve from vague principles to practical mandates. The importance of stable, predictable regulation for sustainable innovation will become increasingly clear.
New Business Models
Open finance will enable entirely new business models:
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Data-as-a-Service: Financial institutions monetising customer data
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Platform Ecosystems: Integrated financial services across multiple providers
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AI-Powered Advisory: Personalised financial guidance based on comprehensive data
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Embedded Finance: Financial services integrated into non-financial platforms
Actionable Takeaways
For Fintechs
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Focus on specific pain points where access to comprehensive financial data creates clear value
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Prioritise consent transparency and build scalable infrastructure from the start
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Embrace partnerships to accelerate innovation and market access
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Invest in data quality and AI capabilities for competitive advantage
For Financial Institutions
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Embrace open finance as an opportunity, not a threat
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Partner with fintechs to accelerate innovation
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Consider data monetisation as a new revenue stream
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Build robust API infrastructure and security frameworks
For Consumers
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Understand your rights under open finance frameworks
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You control your data—choose providers that offer transparent consent mechanisms
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Take advantage of personalised products and services
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Monitor your financial data sharing and revoke consent when appropriate
For Regulators
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Continue developing frameworks that balance innovation with consumer protection
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Support cross-border interoperability to maximise benefits
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Ensure data reciprocity for sustainable ecosystems
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Provide clarity and stability for market participants
Conclusion
How fintechs use open finance to build better products represents one of the most significant transformations in financial services history. By enabling secure, consent-driven data sharing across the financial ecosystem, open finance empowers fintechs to create products that are more inclusive, personalised, and efficient than ever before.
The evidence is compelling: from significant increases in approval rates for underserved populations to transaction times measured in seconds for cross-border payments, open finance is delivering tangible benefits for consumers and businesses alike. Financial institutions are demonstrating how open finance can scale to serve millions of customers with hyper-personalised products.
The regulatory landscape is evolving rapidly to support this transformation. National frameworks and cross-border initiatives all point toward a future where financial data flows securely across institutional and national boundaries.
For fintechs looking to compete in this new landscape, the message is clear: embrace open finance as a strategic priority. Focus on consent transparency, deliver immediate value, build for scale, and forge partnerships that expand your capabilities. Collaboration—not isolation—is the path to success in the open finance era.
For consumers and businesses, the benefits are equally compelling: faster loan approvals, lower costs, hyper-personalised products, and greater control over financial data. As open finance continues to evolve, the financial products of tomorrow will be smarter, fairer, and more responsive to individual needs.
The question is no longer whether open finance will transform financial services, but how quickly and how effectively fintechs and financial institutions will seize this opportunity. By understanding how fintechs use open finance to build better products, all stakeholders can participate in building a more inclusive, efficient, and innovative financial ecosystem.
