The rapid growth of fintech has reshaped how people manage finances, and the pace of change is only accelerating. Not long ago, open banking introduced the idea that consumers could safely share their financial data with third-party apps, unlocking access to a wide range of new services and tools. Today, that idea is expanding into something broader: open finance.
In this article, we’ll explore what open finance really means, the benefits it offers, the risks it raises, and how it’s being put into practice. Drawing on Neontri’s hands-on experience in building and integrating fintech solutions, we’ll also look at key trends shaping the future, and what they mean for businesses and consumers alike.
Key takeaways:
- Despite its benefits, open finance introduces important challenges that banking institutions must understand and manage, including data security and regulatory compliance.
- Open finance brings all financial information together, making it easier for users to stay on top of their finances and choose services that fit their goals.
- APIs enable secure, real-time access to financial data, which supports faster transactions and tailored tools like budgeting apps, lending platforms, and investment advice.
What is open finance?
Open finance is the next step in how financial services are evolving digitally. It extends the open-banking model (where customers let third-party apps access current-account data) to cover a customer’s entire financial life: savings, investments, insurance, pensions, and more.
Instead of each provider keeping information in a silo, open finance links these data sources through standardized APIs (Application Programming Interfaces). Trusted apps can pull those data streams together, giving people, and the services they choose, a 360-degree view of their money and enabling more personalized products, advice, and experiences.
APIs: The backbone of open finance
APIs are what make open finance work. They allow banks, apps, and financial services to connect and share data in a fast, secure, and standardized way, without asking users to hand over their usernames or passwords. That means information can move safely between systems in real time.
Instead of relying on slow, manual steps, APIs handle data exchange automatically. That reduces mistakes and speeds things up. For third-party providers, it means they can build useful new services, such as budgeting apps or loan platforms, using the infrastructure that already exists. And consumers benefit from faster payments, real-time insights, and easier access to financial tools that match their needs.
Consumer data privacy in open financing
At this point, the question comes: Is it all safe?
Companies must provide accessible information about what data they collect and how they’ll use, and who they might share it with. That way, users can make informed decisions and give clear consumer consent before any data is shared. This flexibility helps them stay in control at all times.
Good open finance systems are designed with privacy in mind. They collect only the information that’s actually needed for a specific service—nothing more. For example, a lender might only ask for the user’s income and spending details, not a full transaction history.
Security measures are also a key part of the model. Financial institutions use encrypted data transfers, multi-factor authentication, and continuous monitoring to protect information as it moves between systems.
Regulatory frameworks
As the financial sector undergoes a significant digital transformation, with more electronic payments, new providers, and evolving services, governments are introducing consumer protection regulations while also supporting safe innovation.
In the EU, the European Commission has proposed rules to make data sharing more secure. Existing regulations like PSD2 already require banks to offer APIs that allow trusted third parties to access account data for services such as account aggregation and payment initiation.
To keep up with rapid transformation, driven by digital payment technologies, new financial platforms, and customer demand for seamless services, the EU is working on a new directive: PSD3.
In the United States, the Consumer Financial Protection Bureau (CFPB) is ramping up regulation of companies that deal with financial data. This includes plans to supervise some non-bank providers under existing legal authority.
Regulators globally are working toward the same goal. They want to establish core principles for open finance systems that are secure, transparent, and inclusive. While approaches differ from one region to another, the direction is the same.
Real-life examples of open finance
Open finance enables new kinds of services across core areas of financial life:
- Payments: Users can complete transactions directly within platforms without being redirected to external payment processors. This seamless experience is critical for e-commerce, transportation, and service industries looking to streamline checkout and improve customer satisfaction. Some of the most popular examples include:
- Stripe: Embedded payments and subscriptions for online businesses
- PayByPhone: In-app payments for parking and mobility
- Apple Pay: Secure payments directly linked to financial institutions
- Lending: Business platforms and software can now offer embedded lending, allowing credit without leaving the app. This concept benefits SMEs and seasonal businesses with fast approvals, minimal paperwork, and cash flow-friendly repayment periods. Used by companies like:
- Klarna: Credit options at checkout, powered by open banking insights
- Square Loans: Funding for merchants based on sales performance
- Personal finance management: Apps can connect to users’ bank accounts to help track spending, set goals, and give tailored financial advice based on real-time data. Some well-known apps include:
- Mint: Budgeting and money tracking using linked bank accounts
- Monzo: Smart budgeting and savings tools built on open finance access
- Revolut: Personal finance management features tied to real-time account data
- Business finance: Small and medium businesses can manage banking, expenses, payroll, and lending from a single platform, without switching tools. This is already used by:
- Square: Combines payments, banking, and lending for small businesses
- QuickBooks: Accounting software with bank feed integration for cash flow tracking
- Investment advisory services: Robo-advisors use open finance to build personalised investment strategies based on a user’s full financial picture. By securely accessing data from bank accounts, investment portfolios, and savings, they offer smarter portfolio management. Leading services in this space include:
- Betterment: One of the most popular robo-advisors in the U.S., offering goal-based investing and portfolio recommendations using user-linked financial data
- Wealthfront: Automated investment service that integrates banking and investing to create a complete financial plan
The benefits of open finance
Open finance brings a wide range of advantages to both consumers and the financial sector. Here’s how it creates value:
#1: Better financial control and visibility: Open finance gives customers a more complete view of their financial situation. When all accounts, loans, investments, and insurance are accessible in one place, users can better understand their financial position, make more confident choices, and plan both day-to-day and long-term budgeting more effectively.
#2: Financial inclusion: It helps bring financial services to people who have limited or no access to traditional banking. By allowing secure access to financial data from different sources, open finance creates new ways for underserved individuals to apply for loans or manage money. Also, it encourages innovative solutions, as companies develop services designed for the needs of groups who’ve often been overlooked.
#3: Simplified transactions with secure authorization: Users benefit from faster, smoother transactions that don’t compromise on security. Safe authorization processes make everyday financial tasks easier to manage.
#4: Personalized services and advice: One of the biggest strengths of open finance is its ability to adjust fintech products to individual needs. By analyzing someone’s financial situation, platforms can provide smarter suggestions, from better loan offers to tailored investment advice.
#5: Time-saving financial decision-making: Customers no longer need to search through multiple websites or meet with advisors to find the best offers. Open financing brings everything together, making it easier to compare services and make decisions.
#6: Access to multiple offers in real time: Whether it’s a loan, insurance plan, or investment product, customers can quickly compare different options and choose the best fit. Having more choices leads to better financial outcomes.
#7: Fairer access to credit: When banks decline a loan based on limited account history, open finance can fill in the gaps. A broader financial overview can boost an applicant’s creditworthiness, especially for small businesses or individuals with limited access to traditional banking institutions.
#8: A boost for innovation in the financial sector: Banks and fintechs are under pressure to keep pace with rapid technological change and rising customer expectations. To stay competitive, they need to deliver more value, promote transparency, and provide services that feel personalized to individual needs.
Open finance creates a strong foundation for innovation by enabling secure financial data access. This allows fintech companies to build new products like mobile apps, instant payments, and smarter banking tools.
The threats and risks of open finance
While open finance brings transformative opportunities, it also introduces serious risks that financial institutions must understand and actively manage. These include:
#1: Increased exposure to fraud: The banking industry is, without a doubt, a frequent target of fraudulent operations. With the introduction of open finance, new opportunities for fraud have emerged, including data breaches and privacy issues. Scammers now send fake emails and messages that look like they come from real banks, making it harder for people to spot the tricks.
#2: Vulnerabilities in APIs: As financial institutions started sharing customer data through APIs, these systems became exposed to new security risks. Cybercriminals often try to mimic legitimate API calls or look for weak points in the data-sharing process to gain unauthorized access.
Since users can’t always tell if an API is genuine, securing every link in the chain is essential to protect consumer data. Also, banks need to be proactive—openly share information about safety incidents and learn from one another.
#3: Multi-platform security challenges: The more complex the service and the more data providers involved, the greater the risk. Every element of the data-sharing chain must be secured, especially as open finance expands beyond banking into more financial platforms.
#4: Complex regulations: Navigating regulatory requirements across different markets is a real challenge for financial institutions. While many countries have introduced industry standards to protect consumer data and support secure access, like the EU’s PSD2 or the UK’s Open Banking Standard, the details often vary.
Timelines, enforcement, and technical expectations aren’t always aligned. For companies operating across borders, staying compliant while offering consistent services takes time, resources, and constant adaptation. And even with strong open finance frameworks in place, some risks are unavoidable.
Neontri played a key role in supporting PSD2 implementation in Poland. We developed a PSD2 hub for KIR, the main partner in the Polish payment system, to help banks securely connect with different third-party providers.
#5: Algorithmic bias and discrimination: Some financial services use computer programs to decide who gets loans or insurance. These programs might treat some groups of people unfairly without anyone realizing it, which can cause legal problems.
#6: Operational resilience risks: If one financial service stops working, it can cause problems for other connected services too. This might mean you can’t access your money or complete payments when you need to.
Open finance trends
Open finance is changing fast, with new technologies and partnerships making financial services more connected, efficient, and tailored to what users need.
- AI and analytics in finance: Artificial intelligence is playing a bigger role in financial services. It supports personalized advice, helps detect fraud more effectively, and provides better insights into spending and saving habits.
- Collaboration between banks and fintechs: More banks are working with fintech companies to develop new services, improve customer experience, and meet changing regulatory requirements.
- Real-time payments: Instant payments are making transactions faster and more efficient. They also help expand financial access by supporting users who need quick, low-cost transfers.
- User-focused innovation: New tools like personalized finance apps, automatic savings, and budgeting features are helping people manage their money more easily and stay engaged with their finances.
Neontri: Your gateway to open finance innovation
With over a decade of fintech expertise, Neontri empowers financial institutions to build secure, scalable, and future-ready solutions.
We help banks and fintechs:
- Build secure, standardized API ecosystems
- Comply with regulatory requirements
- Seamlessly integrate third-party providers
- Deliver real-time, innovative financial services to their users
As a trusted partner to key players like KIR, we’re ready to help you lead in the age of open finance. Let’s shape the future of finance together.
Power up your open finance strategy
Leverage Neontri’s fintech know-how to build secure APIs, simplify integrations, and stay compliant—so you can innovate with confidence and speed.
Conclusion
Open finance gives people greater control over their finances and easier access to a wider range of services. It helps them find better offers, manage their finances more effectively, and use personalized tools for saving, investing, or borrowing.
At the same time, open finance brings some risks, especially around data security and how information is shared. Clear regulations, like PSD2, help reduce these risks and keep the system safe.
As open finance develops, we can expect new solutions that improve the way people manage their finances while keeping their data protected.
