Dialogue on disruption: how Open Finance is reshaping the industry

The financial services sector is transitioning to a more open environment, by leveraging the power of connected ecosystems, shared data and platform-based innovation. In this article, industry leaders Simon Paris, CEO of Finastra, and Bill Borden, corporate vice president, worldwide financial services, Microsoft, discuss how the market can collaborate to build new financial ecosystems for growth, encourage sustainable practices and decision-making, and drive positive societal change to empower more people, businesses and communities.

Simon Paris: “At Finastra, we’ve always believed that the collective adoption of Open Finance could result in something truly transformative for the industry, and the world. Recently, we identified three major outcomes of Open Finance: firstly, it creates entire new financial ecosystems; secondly, it can underpin more sustainable decisions; and thirdly, it can drive positive societal change and bring more people, businesses and communities into financial wellness. But let’s start with the macroeconomic view; what do you see at that level that is either driving, or hindering, Open Finance?”

Bill Borden, Microsoft (Image source: Microsoft)

Bill Borden: “There are a lot of macro forces at play right now. One is the cost of capital – a zero cost drove a lot of investment to fintechs over the last decade, and they were pushing the model around what traditional finance truly meant. Second was the involvement of governments and regulators, which drove Open Banking. And third was the democratisation of technology; rising consumer expectations drove institutions to rethink products and services, and how those could be integrated into the customer experience. They’re the big factors going on around the world, albeit at different paces.”

Simon: “This explosion of fintechs started around 11 or 12 years ago, but there was initially hesitation from the financial institutions, wondering if it was an opportunity or a threat. Would you say it’s stabilising?”

Bill: “Yes, we saw institutions ask themselves, if the smaller organisations can offer these capabilities, why can’t we? We mapped an XY axis, with X representing how they were building and modernising their tech stack to directly interface with customers, and the Y being how to extend out into user journeys and compete with fintechs. Then the question moved to, do we build it out ourselves, do we partner, or do we buy? We’ve seen that mature a lot over the last few years.”

Simon: “I love the XY analogy. We took a similar approach at Finastra; expanding and industrialising our mission-critical software, but consuming capabilities that aren’t our core competencies, like biometric authentication or Generative AI. And that leads into our first outcome of Open Finance: creating new ecosystems. What’s the role of technology there?”

Bill: “Technology advancements have driven innovation, digitisation, cloud and more recently, AI and putting data at the centre. In every boardroom around the world, the question has become, how fast can I move? And how can I consume technology rapidly but cost-effectively? Microsoft used to talk about five clouds; now it’s one – and the services are more consumable and consistent.”

Simon: “And of course, cloud reduces barriers to entry, enables innovation at pace, and of course underpins these new ecosystems. But you mentioned AI so let’s stay there for a moment; what are some of the use cases you’re seeing?”

Simon Paris, Finastra (Image source: Finastra)

Bill: “AI’s been in financial services for some time now – decision-making, predictive actions, fraud prevention and so on. Adding Generative AI and large language models to the mix and seeing how LLMs can be used on structured and unstructured data, and how you can interface in natural language, at scale… it’s been dramatic. And this is where the ecosystem can come in – fintechs can embed AI into their value propositions and bring different thinking to larger institutions to encourage new and different directions.”

Simon: “Ecosystems, and the power of imagination… I like that a lot. So, let’s think about that with a sustainability lens – what are you seeing across the industry?”

Bill: “Institutions all want to make finance more inclusive, and Generative AI is exciting in that respect, if it’s used responsibly. Microsoft’s Satya Nadella uses the example of a farmer in India that can use data and GenAI to better predict and optimise his yields, and have the financial industry serve him better, based on this data.”

Simon: “It creates a virtuous circle. But there’s a power – a consumption – question. And a carbon question. How are institutions tackling that?”

Bill: “We’ve all made ESG commitments without necessarily knowing the technologies we’ll need to fulfil them. So, we’re talking to institutions not just about carbon reporting, but about how to create green or investment products that offset emissions and take those to market.”

Simon: “We’re seeing it too – whether our customers want software to price old-fashioned concrete vs green concrete, or price green bonds vs normal bonds. Let’s move onto the last outcome, positive societal impact. What kinds of things are you seeing?”

Bill: “We see societal impact and ecosystem collaboration as connected. For example, I was talking to a customer recently about its approach to insuring V20 countries; those most vulnerable to shock. And they’re asking, how do we create a shared risk model to insure them, and distribute data to help multiple insurers make those decisions? And Finastra is doing similar things – empowering smaller institutions to distribute their capabilities to local communities or markets in a unique way. There’s constant discussion around why it takes so many institutions to move money around the world – and when you combine that with the power of data, insights and AI, well I think there’s going to be a breakthrough.”

Bill Borden was interviewed as part of Finastra’s Finance is Open campaign – click here to watch the full interview.

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