The Relation Between Open Banking, Open Finance, Open Data and Government Body

When open banking was introduced, it aided the financial services industry in giving better services to people. Third-party access as a portal resource to banking data via APIs enabled customers to interact with various financial products while controlling their financial condition. With the rise of open technology, open finance has entered the fray, potentially leading to advancements in the financial market that connects business-financial institutions-and customers to gain better dataset and serve the best customer experience. However, what distinguishes open finance from open banking, and its relation to open data?

Open finance is built on the dataset sharing concept of open banking

Although the government is still in the early stages of figuring out how to properly regulate cryptocurrencies, the rise of open finance is already changing the world. With the ability to connect people across the globe in a way that has never been done before, we are finally slowly beginning to move beyond egocentric thinking into an era of global understanding and cooperation.

Since its initial conception in 2018, open banking has grown in popularity and helped create portal data through open access strategy. People have become accustomed to conducting transactions online and no longer rely solely on brick-and-mortar branch offices after the pandemic.

Customers can use open banking to open a wide range of financial products and services from regulated third-party providers. This new banking system enables more API developers and businesses to develop high-demand products, allowing them to compete with traditional banking services. Open finance, however, will allow them to open the consumer's overall financial transactions big data or dataset.

Where does open data access fit in?

And then there’s open data. Open data is an extensive collection of publicly accessible and reusable data used mainly in this digital era. This can include anything from government data to economic and even science trends. There are several open government data in Indonesia, such as data from the Badan Pusat Statistik (Statistics Indonesia). It is frequently used in both the commercial and nonprofit sectors.

Open finance extends open banking, while open data is the next step. Let’s say open banking is a conventional bank like Mandiri or BCA that adopts API technology, while open finance application like GoPay, so open data is some sort of big-box like Walmart; just like a big-box store, open data offers customers a more comprehensive range of product options.

A revolutionized way to re-engage your customers

Open banking adoption has been low, especially in Southeast Asia, where 70% of the region is still underbanked. That means only a small percentage of the population can access the banking system or any financial institution. Open data can stimulate user growth in this area because it's the key to convenience and providing better solutions through access to open data.

Open data provides a personalization system, so customers who still feel foreign to innovations like cashless payment can re-engage with their financial services. With open data, customers are back to being the centre of financial services and products web or tools.

We now have the technologies that anyone can access, to permit worldwide availability and distributed processes of financial data, broadening collaboration and accelerating financial maturity of the society.

However, open access of data and resources is challenging

Although open finance has a bright future, it also confronts several problems, including:

- Not widely known by the general public

As mentioned earlier, in Southeast Asia, only a small percentage has access to the banking system. In Indonesia, according to the Financial Services Authority (OJK) who conducted the third National Financial Literacy Survey in 2019, the financial literacy index reached only 38.03%. That means the general public are still foreign to the innovation of the banking system nowadays, which can be frustrating to convince people to adopt the new system. It is still in the development process for the government to distribute better open system for global data exchange.

- Data security

Data security is the most significant problem for open banking and open finance, especially here in Indonesia where data breach issues are still high. According to Cyber Security and Passwords for Finance, Trade and Tourism, National Cyber and Crypto Agency (BSSN), the data theft occurred mostly in the financial sector. In 2021 alone, the financial sector is quite a significant target for attacks; 20% are attacks on servers, then 10% are ransomware.

- There is still no clear legal framework

Since open finance is still considered new and foreign, the legal framework for this is still not set in stone. In Indonesia, the government has just regulated it in the Banking Law and in policies on insurance, capital markets, and taxes. The government is still working on a draft law (RUU) regarding data confidentiality.

How about data-commons? A data commons is a platform or application that brings together data, data infrastructure, and applications for managing, analyzing, and sharing data. This allows a community of users to access and use data more easily over both short and long periods of time.

It is hoped that the data confidentiality bill will bring fresh air to the financial services sector and the public. Furthermore, in welcoming open banking, data confidentiality is a must so that the public won’t hesitate to participate in the success of this vision.

As the biggest open finance platform in Southeast Asia, Ayoconnect helps product developers launch the financial features that customers need quickly and efficiently to establish an open data ecosystem in the future.

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