Expanding Access While Managing Risk in Open Finance in Asia and the Pacific

Open finance allows third-party providers to access financial data, with user consent, through secure interfaces. This can support the development of new financial services, from account aggregation to tailored lending and insurance products.

Figure 1: Concept of Open Finance

Source: API = application programming interface.
Source: Kapronasia analysis.

In principle, such systems can lower barriers to entry for new providers, increase competition by enabling a wider range of providers to participate in the market, and broaden the range of services available to consumers, as well as make financial products and services more personalized to users, while lowering costs and improving overall service quality.

Users can also be empowered from improved financial management through access to a broader, aggregated, and near real-time view of their financial health, including cash flows, assets, and obligations. This enhanced visibility can support better liquidity management and financial planning.

They may also improve how financial institutions assess risk and extend credit, particularly for individuals and small businesses with limited formal credit histories or collateral, who are often underserved in traditional systems. This can be achieved by drawing on a broader set of data, such as cash flow and payment transactions, to support creditworthiness assessments, enabling faster and more inclusive lending decisions.

These changes have the potential to expand the inclusion of unbanked and underserved populations in access to affordable services and to create a more level playing field in financial systems, especially in markets where access to traditional services has been uneven.

Open finance may also provide regulators with a more structured and data-rich environment for overseeing financial markets in real time and enabling coordinated, risk-based supervision. Standardized data-sharing frameworks can strengthen consumer protection, enhance regulators’ capacity to manage and safeguard against emerging risks such as digital fraud and scams, improve regulatory oversight, increase competition by lowering barriers to entry, and help advance broader policy objectives such as financial inclusion and financial stability.

Expanding access also expands exposure

Sharing financial data across multiple actors increases the number of points where vulnerabilities may arise. Once systems are interconnected, weaknesses in one part of the ecosystem can affect others. This can raise concerns around data privacy and cybersecurity, particularly in environments where awareness of digital risks is still developing. As financial services become more connected, the importance of strong safeguards and clear accountability grows.

Inclusion depends on infrastructure

Open finance relies on digital infrastructure that is not evenly distributed. Access to reliable internet, mobile devices, and digital tools remains uneven across many parts of Asia and the Pacific, particularly in rural and lower-income communities. This uneven access may limit who can benefit from new financial services. Even where access exists, limited digital financial literacy can make it difficult for some users to navigate new products and services effectively. As a result, efforts to expand financial access through open finance may need to address both connectivity and user capability.

Beyond consumer-facing digital infrastructure, open finance also depends on investment in the underlying technical infrastructure that enables secure data sharing. This includes application programming interfaces (APIs), interoperability standards, consent management mechanisms, identity verification systems, and cybersecurity capabilities. In markets where these foundations are still developing, implementation can be costly and complex, potentially affecting the pace and scale of open finance adoption.

Competition that is not always even

Open finance can encourage competition by allowing more providers to build services using shared data. However, the conditions under which different actors operate are not always the same. In some cases, traditional financial institutions are required to share data, while other participants may not face equivalent obligations. This can influence how competition unfolds and may affect the balance of advantages within the market. Incentive alignment among stakeholders and strong governance frameworks can support more consistent rules across participants, reducing imbalances in data sharing obligations.

Moreover, a growing number of service providers can increase complexity for consumers, making it more difficult to compare and choose between financial products.

Innovation and consumer risk

Faster product development is one of the advantages associated with open finance. More tailored financial products may become available, and services may become more accessible.

However, increased competition can also lead to products that are not always well suited to users. In rapidly evolving markets, consumer protection frameworks may need to adapt to ensure that users are not exposed to unnecessary risks. This is particularly relevant for individuals with limited financial experience, who may find it more difficult to assess product suitability.

Growing demands on regulation

Open finance introduces new layers of complexity for regulators. Oversight extends beyond banks to include fintech firms and other third-party providers, all of which participate in data-sharing ecosystems. Ensuring that these actors follow consistent standards on data security, privacy, and consumer protection can require additional coordination and technical capacity.

Financial institutions may also face challenges in adapting their systems and processes to meet evolving requirements. The shift is not only about expanding regulation, but also about adapting how it is applied.

Technical constraints and legacy systems

Many financial institutions continue to operate on legacy systems that were not originally designed for interoperability or real-time data sharing. Integrating these systems into open finance frameworks can be complex and resource-intensive. For smaller institutions, these constraints may affect their ability to participate fully, which could influence how evenly open finance develops across different markets.

The potential benefits and risks of open finance suggest that outcomes are closely linked to how systems are designed, implemented, and coordinated.

Building trust is likely to be an important consideration. Clear consent mechanisms, strong data protection practices, and transparency around data use can support user confidence.

Inclusion may also require targeted efforts. Expanding digital infrastructure, strengthening financial literacy, and providing accessible service channels can help ensure that more users are able to participate.

Common standards and interoperability can support more efficient integration across systems, reducing complexity while maintaining security.

Clear eligibility criteria and robust consumer protection requirements for third-party providers can be considered, particularly for those not previously regulated in the financial sector, given their access to sensitive customer data from other financial institutions.

At the same time, regulatory approaches may need to evolve. Phased implementation and collaboration between public and private stakeholders can help balance innovation with oversight and promote a more cohesive ecosystem. 

Open finance has the potential to reshape financial systems across Asia and the Pacific. It may expand access, improve service delivery, and support broader participation in financial markets. It becomes more inclusive when it is designed with that objective in mind.

The same mechanisms that enable innovation may also introduce risks, particularly where infrastructure, literacy, and regulatory capacity vary. Ultimately, the direction of open finance will depend on how these factors are addressed. Decisions made around governance, inclusion, and system design are likely to influence how benefits and risks are distributed across the region.

Asian Development Bank. 2024. Redefining Financial Ecosystems in Asia and the Pacific: A New Era of Open Banking, Open Finance, and Inclusive Growth.