Luxembourg for Finance finds that firms that fail to adapt for “open finance” will fade into irrelevance
The pace of “open finance” – an industry trend that is enabling greater convenience and transparency for consumers of financial services and products through more data sharing – is increasing and inevitable, according to a new report.
The research, prepared by PwC Luxembourg and commissioned by Luxembourg for Finance (LFF), argues that open finance is proving to be a revolutionary change in the structure of the financial industry. It is blurring the traditional boundaries between banking, insurance, asset management and payments – often bridged by intermediaries and brokers – merging these industries into a unified network powered by data, technology, and interoperability.
The era of open finance is already reshaping the structural outlook for the industry and is speeding up thanks to three core drivers: regulation, demographics and technology.
The report concludes that in the banking industry:
- Data monetisation will become a major revenue stream for financial institutions that provide customer data to third parties with client consent.
- Banks in Europe are well-positioned to benefit from this trend due to their broad access to customer data.
- This will be driven by a Gen Z and Millennials, who are far more comfortable with data sharing, with over 50% willing to sell their data to third party providers in exchange for ease and convenience.
- They already make up a significant tranche of today’s open banking users, with 29% of 16-24 year olds and 26% of 25-34 year olds making online banking payments in 2023.