From open banking to open finance

The data-sharing revolution known as open banking has been transformative for the financial services industry. Where once data was siloed and complex, the strategic use of APIs has enabled technologically adept financial institutions to offer easier access to competitive services for their customers. Now, we are entering a new phase as these data sharing arrangements evolve. 

Advancements in technology and changing customer expectations are now broadening the scope of what is possible. To reflect this, the concept of open banking is transitioning to what is known as open finance. In this article, we explore:

  • What is open banking?
  • What is open finance?
  • The differences between open banking and open finance
  • The challenges to adoption that open finance faces
  • How Tuum enables open finance use cases

Read on: Banking as a Service, Banking as a Platform & Open Banking – Knowing the difference

What is open banking?

Open banking is a term that describes the sharing of customer data between financial institutions and regulated third parties for payment initiation and account information services. Data is shared between these institutions via secure APIs and only at the request of the customer. 

Open banking has led to greater transparency for consumers, who now have more control over their financial data. It is also used to facilitate innovations for both markets and customers.

What is open finance?

Open finance is the next step in the evolution of open banking, where existing frameworks are being built upon to expand data access and data source sharing beyond the initial payment/transaction data use cases represented in open banking. Data is shared following authorisation by the customer, giving them control over exactly which third parties can access their data. 

Open finance is a relatively new concept, and there are currently not many use cases. One potential process which can be transformed by open finance is in mortgage brokering:

Open finance – mortgages

The process of applying for a mortgage is lengthy, complex, and in many cases still paper-based. With open finance, this process can be streamlined:

  • Sharing data between different parties
  • Automating eligibility assessments and applications (while ensuring GDPR compliance)
  • Including additional points of data in the credit scoring process
  • Enabling consumers to correct information that may affect their credit score

The difference between open banking and open finance

Open banking is more limited to retail and investments, and mainly focuses on the sharing of payment and transaction data, as outlined in initiatives such as PSD2

“In most cases, open banking specifically refers to payment initiation and account information services…”


On the other hand, open finance covers the entire financial spectrum; loans, consumer credit, investments, pensions, etc. It goes beyond simply banking products. Additionally, open finance can include the integration of financial data with non-financial industries, such as healthcare. 

Challenges to adoption

As open finance requires the sharing of data via APIs, businesses aiming to adopt it must operate on modern technology stacks. As many financial institutions still operate on legacy systems, they simply do not have the architecture to support the open sharing of data that open finance demands. Any financial business pursuing an open finance strategy will need to operate on a modern core banking system.

Additionally, as open finance is a relatively new concept, it has not yet received the same regulatory support as open banking. There are a number of IT and fraud risks associated with this data sharing that need to be addressed. The European Union has indicated that it intends to establish a legal framework, but these discussions are in early stages. An initial presentation of the legislative proposal is scheduled for Q2 of 2023.

Enabling open finance

Open finance represents the future of how consumers can share their data to enable seamless customer journeys. Tuum supports businesses in exploring open finance use cases by providing a powerful API-first back-end system – we provide the tech, you focus on innovating.

Get in touch to find out more.

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