The Financial Conduct Authority has backed the idea of open finance as a means to increasing access to financial advice.
Speaking at The Investments and Savings Alliance open finance conference in London today (November 18) Sheldon Mills, director of competition at the FCA, said open finance was an area of significant interest for the regulator which could "substantively change" the nature of competition in the market.
But he warned the concept of shared data across the financial services industry also carried risk for consumers.
Open finance allows financial institutions to share data about their client, in turn allowing clients to see their financial products in one place. For instance, they might see their pension savings through their personal banking app.
It could also mean provider or adviser access to a person's current account history and spending habits, alongside their investment and pension products.
Mr Mills said: "You can start to see how this evolves into a package which works in the interest of consumers: advice, frictionless changes between products, information on spending whenever you want or need it.
"All of which happens with full responsibility and, potentially, control resting with the consumer."
The competition director said advice will become "especially important" as consumers become responsible for more of their financial decisions and the regulator is currently exploring how open finance and advice can work together.
In May the FCA published a call for input on the impact of the Retail Distribution Review and the Financial Advice Market Review, asking for industry feedback on the role of regulation in the market, barriers to effective competition and the affordability of advice and guidance.
Mr Mills said: "It’s something the FCA has been considering very carefully in our Retail Distribution Review and Financial Advice Market Review.
"Advice should be easy to understand and accessible at any time. Harnessing the data which open finance could provide, means more individually tailored advice can be given to help consumers manage their financial responsibilities."
But Mr Mills warned the concept of open finance also raised questions about the ethics of data usage and sharing, including the potential for increased risk of scams and fraud - a "very real consideration" which he said the FCA had thought proactively about.
He added: "Equally, the challenges are not purely focussed on consumer outcomes, but also on the nature of competition and the journey firms may need to take to adapt to open finance.
"The cost of infrastructure may be daunting for firms who are already facing cost-cutting measures and tighter bottom lines. Of course, this a decision for firms which will be balanced against the benefits and incentives."
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