Open Finance
What Is Open Finance? Definition and How It Works
Definition
Open Finance is the extension of open banking principles, standardised API-based data sharing and service initiation with customer consent, beyond payment accounts to the full spectrum of financial products, including savings, investments, pensions, insurance, and mortgages. Open Finance enables licensed third parties to access and act on a consumer's complete financial picture across multiple providers.
How it works
Open banking under PSD2 established the model: regulated institutions must provide API access to payment account data and payment initiation for licensed third parties. Open Finance extends this to non-payment financial products PSD2 explicitly excluded.
Under an open finance framework, a consumer could authorise a third-party application to read balances from savings accounts, ISAs, and pension funds, not just their current account, enabling comprehensive financial aggregation. They could also authorise initiation actions: switching an insurance policy, requesting a remortgage, or moving investments, all through a single interface.
Regulatory frameworks vary by maturity. The EU's Financial Data Access (FIDA) regulation, proposed in 2023 alongside PSD3, establishes an EU open finance framework beyond payments. The UK's Smart Data Roadmap extends open banking obligations to mortgages, savings, and investments. Australia's Consumer Data Right (CDR) went live for banking in 2020 and has since expanded to energy; telecommunications has been designated but not fully implemented.
Why it matters
Open banking demonstrated commercial value, account aggregation apps, mortgage affordability assessments using live transaction data, credit underwriting based on open banking income verification are all established products. Open Finance extends this by broadening the data set available to third-party applications.
For payment providers, open finance creates data opportunities: access to investment and savings data alongside payment history enables more sophisticated credit decisioning, more personalised payment product recommendations, and more accurate affordability assessments, particularly valuable for embedded lending and BNPL underwriting.
With PXP
PXP supports merchants and partners across the payments value chain. To talk through open finance and open banking as part of your payment strategy, get in touch with our team.
Frequently asked questions
What is the difference between open banking and open finance?
Open banking grants licensed third parties access to payment account data and payment initiation under PSD2. Open finance extends this to the full financial portfolio, investments, pensions, insurance, mortgages, enabling broader data aggregation and potentially action capabilities. Open banking is a subset of open finance.
What is the EU's FIDA regulation?
FIDA (Financial Data Access) is the European Commission's proposed regulation for EU open finance, published in 2023 alongside PSD3. FIDA would require financial institutions in categories beyond payment accounts, insurance, pensions, investments, mortgages, to provide standardised API access to customer data with consent. It is in legislative progress as of 2025/2026.
Which countries have implemented open finance?
Australia is most advanced with its Consumer Data Right (CDR), mandating open data sharing across banking (from 2020) and energy, with telecommunications designated but not yet fully implemented. The EU has open banking under PSD2 and is progressing FIDA. The UK has established open banking through the OBIE and is developing a Smart Data Roadmap for broader data portability. Brazil's Open Finance initiative covers banking and insurance.
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