How Does Open Finance Fit in the Fintech (Financial Technology) Partner Ecosystem?
Open finance enables companies to gain better access to user data in business. The objective is to create data-driven processes and provide consumers with the finest personalized solutions. Users can safely share any financial information using API, including savings, insurance, mortgages, etc. Additionally, open finance can aid fintech partners or companies in lowering operating expenses and risks.
Then there is the fintech ecosystem, where different organizations will gather to reach their common goal, which usually means the adoption of new technologies to improve their services and disrupt the traditional banking sector. Since we are dealing with open finance and much information, will open finance fit in the ecosystem?
Understanding fintech ecosystem
The idea behind a fintech ecosystem is to develop an appropriate setting where various financial technology services can cooperate. FinTech 1.0, which runs from 1866 to 1913, is when the first attempts were made to create a suitable infrastructure. The government frequently creates businesses that provide financial services and startups, where one partner helps the other.
By establishing a collaborative environment for fintech partners, startups, or other financial institutions, fintech ecosystems advance the industrial growth of the sector. As a result, goods and services are of higher quality, and information and best practices can be exchanged. For example, using an ecosystem, China’s WeChat increased its user base from 160 million in 2012 to 1.2 billion in 2021.
How open finance helps the fintech ecosystem
In Southeast Asia, in the past two years, fintech solutions have started to become more frequently used. E-wallet usage increased by 45% from before the pandemic outbreak. Reports from Google, Temasek, and Bain & Company predict that by 2025, the number of transactions using e-wallets will have increased by more than 200%.
People can still use cash, as it will not disappear anytime soon, but the region is seeing more and more fundamental changes due to the rapid expansion of digital payments. The region’s financial inclusion is advanced by using open finance solutions.
Open finance gives consumers more options to engage with money and banking to democratize the industry. This democratization can therefore encourage inclusion and creativity in the industry through fintech ecosystems, which can positively affect economic growth.
How is it now in Indonesia?
According to Cekindo, the fintech field has allowed fintech partners to develop new possibilities in Indonesia, thanks to US$500 billion in infrastructure investment expected over the next five years.
Due to the expansion of the high middle class, Indonesia presently has a very high internet penetration rate, with more than 70% of the population spending hours online. More than that, Indonesia is a rich ground for fintech expansion, particularly in the lending, card, and payments areas.
There are already more than 150 fintech partners and startups in Indonesia, an increase of 78% since 2015. In Indonesia, there were 249 fintech companies as of May 2019, which is anticipated to rise over the coming years. Looking at Indonesia’s fintech ecosystem, we can see that 44% of the fintech industry consists of payment service providers.
“Blueprint Sistem Pembayaran Indonesia 2025” (BSPI 2025) to facilitate open finance
A coherent framework for payment system policy is required to deal with the current development of the digital economy and finance. Along with the new benefits and opportunities that open finance brings, some risks must be mitigated. That’s why this blueprint payment system will be thorough and balanced.
Taken from Bank Indonesia’s website, the blueprint consists of five payment system visions for 2025. Five working groups will carry out the implementation: Retail Payment System; Open Banking; Data and Digitalization; Regulatory, Licensing, and Supervisory Reforms; and Large-Value (Wholesale) Payment System and Financial Market Infrastructure. BSPI 2025 will be implemented through 23 key deliverables from 2019 to 2025.
Indonesia has a sizable open finance market that can be maximized to increase regional digitalization. Open finance gives way to innovation advancement by fintech partners due to the multiplicity of fintech ecosystems. If you are interested in knowing more about how open finance can help your business, visit Ayoconnect, the largest open finance platform in Southeast Asia.