Data Conference 2020: Open solution for those shut out

Open finance data has the potential to tackle financial exclusion by offering people better access to financial services and increasing their credit worthiness.

Open finance data has the potential to tackle financial exclusion by offering people better access to financial services and increasing their credit worthiness.
Open finance data has the potential to tackle financial exclusion by offering people better access to financial services and increasing their credit worthiness.

The potential of the Global Open Finance Centre of Excellence, based in Edinburgh after the UK government funded it through a £23 million Strength in Places grant, was discussed in the session, How Can Open Finance and Data Innovation Tackle Financial Exclusion.

Nicola Anderson, acting chief executive of FinTech Scotland, said the centre was designed to think about problems in an innovative and collaborative way.

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She explained: “It brings the university, industry and policymakers together to think about how financial data could be used to explore key issues in a really trusted and neutral way.

“It will consider the type of data required for social and public policy advancements, and think about it from an ethical and regulatory perspective.”

Anderson highlighted work already under way that will make an impact on financial exclusion.

“We’ve started to see innovators thinking about income maximisation,” she said, citing a start-up business looking at the integration of welfare benefits and financial data to help people during Covid-19.

“We’re also seeing innovators think about what banking data tells us about advancing financial inclusion, credit worthiness is a really great example of this.”

Professor Gbenga Ibikunle, chair of finance at the University of Edinburgh, says it is important for companies to have as much information as possible to provide a more inclusive service.

“If we are able to access more data in a relatively frictionless manner, like open finance is expected to encourage, we can enhance the ability of financial systems to function as they are meant to – helping make fair and balanced decisions that are critical to the financial wellbeing of millions of customers.

“Every additional data point or observation potentially provides information that can aid decision-making.

“There are two main consequences of this. The first is that companies benefiting from access to more data will become less susceptible to costly information asymmetry. This is positive for customers as well, because the companies can offer cheaper products.

“Secondly, the effect of the cheaper access to products is improved societal welfare – improved financial positions for customers is beneficial for society in many ways.”

Gavin Starks, founder of not-for-profit IcebreakerOne, said that in future, data analysis could be used to predict which businesses and individuals are most at financial risk, particularly during a crisis like Covid-19.

“It would be amazing if we were able to have analytics right down to the individual level,” he said. “We could have pre-emptively worked out who would be most at risk from lockdown, and where all that bailout money should have gone in advance. People could have had a text message the following day, ‘If you opt in here, we’ll work it out now and the money will be in your bank account at the end of the day’.”

Zachery Anderson, chief data and analytics officer at NatWest Group, agreed individualisation was the future. He said: “Data really gives us the opportunity to be able to … think about individuals and about what their particular circumstance dictates – what we can learn from their financial history, or what we can leverage to give them access to credit.

“This is the real potential –

the opportunity for us to work across all the networks we operate in. It’s pretty powerful.”

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