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ForgeRock: Regulatory Innovation Spurring Financial Digital Transformation

With the constant innovation of the financial sector, organisations are facing increasing pressures to keep up with the ever-changing needs of the consumers. The push to digital this past year has also been a factor, as well as the constant regulation and compliance requirements.

Nick Caley is Vice President of UK and Ireland at ForgeRock is responsible for advising global clients in industry and government on security strategy and digital transformation focused on hybrid data architectures and data-driven business models. 

Here, Nick shares his views on how regulatory innovation is spurring financial digital transformation.

Nick Caley, Vice President of UK and Ireland, ForgeRock

Today, amid a global pandemic replete with its own challenges, financial institutions are facing increasing competitive pressures. Like in all sectors, from automotive to retail, financial services customers increasingly expect superior user-friendly applications of their data, as they shift their consumption of services to digital

What that means in practice is that for financial services firms, whether they can pull ahead of the competition is increasingly defined by their ability to deliver their customers more control over the whole of their financial affairs in a way that is digitally seamless and connected. This of course requires innovation and digital transformation, both often challenging on their own but more so in the context of a wider adjustment to remote working. For all but the cloud-native, mobile-first Challenger Banks and fintechs, demand for innovation often outstrips the ability to deliver. As a result, many financial institutions risk falling behind and losing market share to competitors.

As recent announcements have shown, including the FinTech Strategic Review, one way that the government and regulators have tried to ease the way to this type of innovation is to encourage collaboration between fintechs and incumbents. 

To date, the biggest manifestation of this has been the Open Finance initiative, which aims to link together disparate financial players to create cutting-edge financial products, services and applications that fit into a fully integrated ecosystem, through the use of open APIs (Application Programming Interfaces). Pressure from regulations such as Open Banking (UK), PSD2 (EU) and upcoming legislation spurred on by the Pensions Schemes Act 2021 (which enabled the creation of Pensions Dashboards) are driving financial services companies to adopt open APIs at a record pace.

After years of delays, 2021 looks to be the year in which the financial services industry will finally be transformed by Open Finance and open APIs. This would be a gamechanger for consumers as it would democratise access to financial services, create more competition, and put people firmly in control of their financial data. 

Open technologies are turning vision into reality

Open Finance builds on the regulatory and conceptual framework of Open Banking, extending it to other products such as consumer credit, insurance, mortgages, pensions and savings. When adopted across the financial services ecosystem, it will create a variety of secure, trustworthy, and user-friendly tools that empower users to engage more meaningfully with their finances.

The UK Pensions Dashboard, a simple interface that allows citizens to monitor and manage all their pension pots from a single platform, has shown how this can be done. The Pension Dashboard’s architecture – federated digital identity, user-managed, consent-based access for advisors, and interoperability through secure Open APIs – provides a viable model for Open Finance. Crucially, these technologies conform to open standards, meaning that the architecture that underpins them can be updated and synced with any new technology.

The industry is starting to look at how these principles could be applied more widely to Open Finance – allowing third-party providers to create products, services and applications across a range of financial provision such as insurance, banking and pensions, that fit into a fully integrated ecosystem

Innovation troubled by complexity and security

While simple in concept, delivering this innovation is anything but. The financial services sector is a complex patchwork of interconnected providers and services all at different stages of digital transformation. Implementation therefore looks tricky, to say the least. No surprises that Open Banking and the Pension Dashboards, two of the most high-profile Open Finance initiatives, have already encountered challenges, many of which may be instructive for the future of other such efforts.

First is the agglomeration of regulators, including the Financial Conduct Authority (FCA), The Pensions Regulator (TPR), government schemes and third-party technology providers. This disparate landscape has made coordination difficult, despite working groups that have been established by coordinating bodies like the Open Banking Implementation Entity (OBIE) and the Money and Pensions Service (MaPS) Pensions Dashboard Programme (PDP).

On top of this, the data in question is generally sensitive and heavily regulated. As a result, as open APIs become more commonplace, a tension must be managed between the need for data accuracy, identity verification and security on the one hand – and transparency and open sharing of data on the other. Needless to say, this balancing act is occurring against a backdrop of heightened data concern – according to recent research, nearly 80% of fintechs and banks were concerned about the ‘cybersecurity and privacy’ of the data they handled.

Another hurdle has been that banks and pension providers have lacked the readiness and technical capability to deliver the infrastructure required for Pensions Dashboards and Open Banking to materialise, delaying both schemes. Perhaps this slow pace is a blessing in disguise, giving consumers time to adjust and be educated on the benefits. After all, people aren’t averse to innovation, but they become understandably concerned when they feel it is being done ‘to them’ rather than ‘for them’. 

A digital big bang? 

So what’s next? What looks certain is that innovation in open API-based initiatives will continue. Those providing open APIs and other backend infrastructure to connect non-financial firms to financial services will be at the vanguard of this next phase. Post-Brexit, as the UK’s crown as Europe’s financial hub looks increasingly precarious, the challenge will be capturing this acceleration to innovate all sectors of the finance industry as a whole.

The Fintech Strategic Review recently called for the establishment of a ‘coalition on Open Finance’ to examine ‘new data-sharing opportunities across fintechs, banks, insurance companies, investment managers, pension providers, financial advisors and intermediaries to better target new product and service development’ using the existing open API-based digital sandbox environment, which was pioneered in the UK. Ultimately, this would lead to more product ‘proof of concepts’ based on open APIs being developed, trialled and launched.

UK Finance, the UK’s principal financial services trade association, has made steps towards entrenching Open Banking as a permanent feature of the industry landscape, following a 2016 mandate from the Competition and Markets Authority to increase competition and customer choice in the sector. In early March, UK Finance outlined its latest move: funding a new not-for-profit entity that would turbocharge innovation, funded by a group of the UK’s largest banks. 

Overall, these initiatives represent a meaningful step towards true adoption by the finance industry of open finance and open data frameworks. If it succeeds in heralding an end to years of delay on innovations around the Pensions Dashboard and Open Banking, the industry might finally be able to deliver the choice and control consumers are increasingly demanding.


  • Polly is a journalist, content creator and general opinion holder from North Wales. She has written for a number of publications, usually hovering around the topics of fintech, tech, lifestyle and body positivity.

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