Global account ownership in low- and middle-income countries (LMICs) has increased by 80% over the past decade. Yet one in five adults — about 1.3 billion people — remain unbanked, and 300 million accounts sit unused. Why? Because access alone isn’t enough. There are still persistent gaps in relevance, affordability, and trust, especially for low-income households, women, small businesses, and rural communities, who continue to face barriers that digital access alone hasn’t solved.
One overlooked solution? More competitive financial markets. When providers compete to serve people better with more relevant products, lower fees, or better service, everyone benefits. One policy tool that can help unlock this competition is open finance.
Open finance as a market-shaping tool
Too often, open finance is seen as a technical fix, but at its core, it’s a policy and regulatory framework that can help shape financial markets. It enables individuals and businesses to securely share their financial data across institutions, with their consent, shifting control from a few dominant providers to consumers and the broader ecosystem.
This shift has powerful implications. By making customer data portable and interoperable, open finance lowers barriers for new entrants such as fintechs, cooperatives, and community-based institutions. It levels the playing field, enabling these actors to offer tailored, affordable services to customers traditionally underserved by incumbents.
However, open finance is not inherently competitive or inclusive. Its impact depends on how it is designed and implemented: who participates, what rules apply, how governance is structured, and whether it’s guided by clear public policy goals like healthy competition and financial inclusion. If authorities want to promote competition or inclusion, they should make those objectives explicit in the framework’s design.
In many countries, financial markets are still highly concentrated. A few large institutions control critical infrastructure and vast amounts of customer data, limiting innovation and raising entry barriers for new players. This results in fewer choices and higher costs for consumers, especially those on the margins.
Open finance offers a way to change that. When well-designed and implemented, it can expand access, foster innovation, and shift market dynamics in favor of consumers. Consider India, where its version of open finance, the Account Aggregator (AA) framework, has processed nearly 250 million consent checks by 2025, much of it helping lenders assess the creditworthiness of borrowers with little or no formal history, and supporting the disbursement of nearly $20 billion in loans. In Brazil, the phased rollout of open finance helped drive a surge in instant payments, with PIX now used by over 76% of adults and credited with bringing more than 70 million people into the formal financial system.
These results were not accidental; they stemmed from intentional policy choices that positioned open finance as a tool to shape more open and inclusive financial markets.
Six policy levers to make open finance work for everyone
CGAP’s research highlights six key levers that financial sector authorities can use to design open finance systems that truly work for low-income and underserved people.
1. Clear policy objectives: anchoring inclusion and competition goals
Clear objectives are the foundation of any open finance initiative. When regulators articulate what they want to achieve, whether it’s expanding financial access, increasing competition, or reducing information asymmetries, they can align policy and market design to deliver on those outcomes.
Take Brazil, for example, where the Central Bank explicitly prioritized consumer choice and competition. That clarity led to broad participation in the data-sharing framework from over 900 institutions covering over 95% of the country’s financial relationships, which has, in turn, helped increase fintech participation in digital credit markets. Clarity of purpose ensures coordination across public and private actors and provides a roadmap for measuring success.
2. Reciprocity: ensuring incumbents and challengers both contribute
Real competition requires mutual data-sharing. Without reciprocity, large incumbents who control most customer data can easily retain their market power. Without it, open finance risks reinforcing existing power imbalances rather than leveling the field. In the UK, for example, a phased rollout began with the largest nine banks and gradually expanded to include more institutions, backed by mandatory timelines.
Reciprocity also unlocks value for incumbents. In India, incumbent banks plan to use third-party data access requests as a signal that their customers may be shopping for credit elsewhere, giving them a chance to respond with timely and personalized offers. When all players share data on equal terms, markets become more dynamic and customer-focused.
3. Inclusivity in participation: bringing smaller providers along
Across emerging markets, smaller providers such as microfinance institutions, cooperatives, and rural banks serve customers that larger institutions often overlook. Yet, they’re frequently left out of open finance frameworks due to high costs, technical complexity, and regulatory uncertainty.
When smaller institutions are part of the ecosystem, open finance becomes more inclusive by design. Bringing them in requires practical policy interventions. Regulators can create phased or simplified entry pathways for smaller players to join open finance ecosystems with proportionate compliance requirements based on their size, services offered, and data risk. For instance, Brazil’s open finance model incorporates multiple tiers of data access and obligations, creating more entry points for diverse actors.
Other solutions could include enabling USSD and SMS channels for customers without smartphones, supporting shared onboarding infrastructure, and tailoring compliance requirements to provider size and risk.
4. Proportional regulation: leveling the playing field
Innovation doesn’t thrive in a one-size-fits-all regulatory environment. If all providers are held to the same complex standards, smaller or mission-driven institutions could be crowded out.
A more effective approach is proportional regulation — calibrating rules to an institution’s size, risk exposure, and capacity. Singapore’s APIX sandbox provides streamlined compliance pathways for community banks and startups.
This isn’t deregulation, but smart regulation. By reducing unnecessary burdens on low-risk actors, regulators can foster innovation and inclusion while still protecting the integrity of the system.
5. Pricing the infrastructure: balancing costs and access
Data-sharing comes with operational costs, but how those costs are passed on determines who can participate. For instance, in Brazil’s open finance model, most fintechs and other small players pay lower shares of the shared infrastructure costs than larger participants, making the system affordable and scalable. When API fees are too high or pricing is opaque, smaller providers and the customers they serve are often excluded. Transparent and inclusive pricing models are essential to ensure open finance doesn’t become a tool only for large, well-resourced actors. The cost of participation should never be a barrier to financial access.
6. Governance of open finance: ensuring competitive outcomes
Governance decisions shape how open finance evolves over time. They determine who sets technical standards, how disputes are resolved, and whether the interests of smaller providers and consumers are represented.
Effective governance includes clear decision-making processes, public transparency, and inclusive participation. In Brazil, the Central Bank chairs the open finance steering committee, bringing together more than 20 institutions, including banks, fintechs, and rural cooperatives. The committee holds quarterly public meetings and publishes compliance dashboards, keeping all stakeholders informed and accountable.
Inclusive governance prevents capture by dominant actors and ensures that open finance remains responsive to public needs. It’s what turns a technical platform into a policy instrument that benefits everyone.
Open finance can transform competition in financial markets, but only when it’s designed and implemented intentionally. Done right, it can help unlock innovation, improve consumer choice, lower costs, and expand access to underserved and excluded populations. The six policy levers outlined above provide a practical roadmap for financial authorities to build open finance frameworks that are not just technically sound but competitive, inclusive, and impactful.
This blog is adapted from an article first published in the CPI TechReg Chronicle.
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