Publication: Open Finance: The Korean Experience and Opportunities and Challenges for the East Asia and Pacific Region
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2024-05-28
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2024-05-28
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The importance of data in the economy is exponentially growing. Although the amount of data generated and analyzed in the economy has always grown, the recent growth in data generation and the advancements of analytic technology are much faster than in the past. Open data, which grants the right to data portability to data subjects, is becoming a popular policy option to enhance the efficient use of data in society and reduce privacy costs. The financial industry is one of the leading sectors implementing the right to data portability through open banking and open finance initiatives. Open finance is a natural extension of open banking to sharing customer-permissioned data by financial institutions with third parties. The policy objectives for open finance vary by country. Financial innovation is among the first policy objectives. The Republic of Korea set innovation in financial services, especially in payments and settlements, as the policy objective of open banking. Another objective is competition through financial innovation and the emergence of neo financial institutions such as Fintechs and the big techs. Strengthening consumers’ data-related rights has been a policy objective in many countries. Open finance in the Republic of Korea and General Data Protection Regulation (GDPR) in the European Union (EU) are notable examples. Finally, in some cases, enhancing consumer benefits, through financial innovation and the promotion of competition, has been set as a policy objective. Open banking and open finance will provide more opportunities and challenges to achieve those policy objectives than financial innovation in the past. First, open banking and open finance allow the consent-based sharing of a complete footprint of data rather than specific ones like delinquencies. This sharing results in a significant improvement in the quality and entirety of data sharing. Second, open banking and open finance enable third parties, often not financial companies, to build business models as marketing platforms, advisers, intermediaries, or agents for financial services.
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“World Bank. 2024. Open Finance: The Korean Experience and Opportunities and Challenges for the East Asia and Pacific Region. © World Bank. http://hdl.handle.net/10986/41600 License: CC BY-NC 3.0 IGO.”
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