Open finance comes of age: what banks, insurers and fintechs must build now
Open finance is edging out of policy papers and into practice in South Africa. For financial institutions, the opportunity is real, but so are the risks around data, consent and trust.
For years, open finance has hovered on the edges of industry debate – discussed in policy papers, tested in pilots, and often dismissed as something for more mature markets to figure out first. In South Africa, that hesitation is fading. With the Financial Sector Conduct Authority (FSCA) setting out a clear policy position, open finance is no longer theoretical. It is becoming a build-now reality.
That matters not just for banks, insurers and fintechs, but for millions of South Africans who remain underbanked or excluded from formal financial services altogether. According to the latest PayFast report, nearly a third of South Africa’s population, approximately 19 million people, remain underbanked, relying heavily on cash or lacking full access to formal financial services. If implemented well, open finance could reshape access to credit, insurance and digital payments in ways that reflect South Africa’s economic and social realities.
At its core, open finance rests on a simple principle: financial data belongs to the customer, not the institution. With the customer’s permission, that data can be shared securely with third parties to create more relevant and inclusive financial products. Unlike open banking, which focuses primarily on transactional data, open finance extends across credit, insurance, savings, investments and pensions – a distinction that matters in a South African context. For South Africa, the challenge is not a lack of financial activity, but a lack of visibility into it.
“South Africa has a very underbanked population,” says Nathan Schaefer, Analyst at Elenjical Solutions. “Many people aren’t part of the traditional banking system, but they still interact with financial products – whether that’s insurance, informal credit or digital payments. Open finance allows that information, with consent, to be used to design products for people who are currently invisible to banks.”
The FSCA has been clear that open finance is not a move towards deregulation. Rather, it reflects an effort to introduce a structured and secure framework for data sharing that balances innovation with consumer protection. Data standards, consent, liability, commercial models and data protection sit at the centre of the regulator’s thinking and form the foundations of an access-to-data regime that organisations must now start preparing for.
“Open finance is frequently framed as deregulation, when it is better seen as an effort to put clearer rules around how customer data is shared,” says Stefan Smit, Analyst at Elenjical Solutions. “The real test will be whether customers genuinely understand what they are agreeing to, who their data is shared with, and how easily that consent can be withdrawn. If consent becomes opaque or overly complex, trust quickly erodes.”
From a practical standpoint, one of the clearest signals from the FSCA is its preference for APIs, secure digital interfaces that allow systems to share specific data in a controlled way. Many fintechs still rely on screen scraping, which, while effective in the short term, introduces avoidable security, privacy and accountability risks. APIs allow institutions to limit access, monitor usage and define exactly what data is shared and for how long.
If data standards are the backbone of open finance, trust is its currency. “People are rightly cautious,” adds Schaefer. “They want to know where their data is stored, who can see it, and what happens if something goes wrong.”
As data moves across banks, insurers, fintechs and third parties, accountability must remain clear, or confidence in the system will weaken. There is also tension in how open finance will be commercialised. The FSCA has suggested that basic customer data should be shared without charge, while value-added insights may be monetised, to avoid barriers to entry that favour large incumbents.
“If access to data becomes something only well-funded players can afford, competition is inevitably weakened,” says Smit. “Treating core data as a shared utility is what keeps the ecosystem open.”
For product leaders and chief risk officers, the question is no longer whether open finance will arrive, but whether their organisations are ready. That means assessing infrastructure, consent design, governance frameworks and legacy systems now – not later.
“Trying to retrofit all of this at the last minute will be painful,” Schaefer notes. “The organisations that start early will have a real advantage – not just in compliance, but in how quickly they can innovate.”
Open finance will not be perfect from day one. There will be gaps and growing pains. But for South Africa, and potentially for other developing economies watching closely, it represents a rare opportunity to design a more inclusive financial system from the ground up. If banks, insurers and fintechs focus now on building the right technical, regulatory and ethical foundations, open finance can become more than a regulatory requirement. It can become a catalyst for meaningful change.
Original Article – FinancialFortuneMedia & AfricanEyeReport