Open finance marks a pivotal moment in the evolution of digital finance. Unlike open banking, which focused narrowly on access to regulated bank data, open finance extends interoperability across your entire financial footprint: from mortgages and pensions to payroll and insurance.
This leads to a programmable, modular ecosystem where financial services no longer operate in silos but connect through shared data and logic.
What is open finance?
Open finance represents a foundational shift in how financial data flows between institutions and services. Unlike its predecessor open banking, open finance extends consumer-permissioned access to your entire financial footprint beyond just banking data.
At its core, open finance creates an infrastructure for interoperable, user-controlled financial ecosystems built on four key principles:
Key principles:
- Consumer consent: Users control who can access their data.
- API-first architecture: Data moves through secure, standardized connections.
- Transparency and portability: Users can track, revoke, or move access at any time.
- Innovation and inclusion: Opens financial services to new markets and providers.
Open finance vs. open banking
What's included in open finance:
- Investment accounts
- Mortgage information
- Insurance policies
- Pension + retirement data
- Payroll systems
- Loyalty programs
- Utility bill and payment history
The key distinction comes down to scope and opportunity. Open finance creates a comprehensive ecosystem rather than just opening up banking data.
How open finance works
graph LR
A[Consumer grants permission] --> B[Third-party provider accesses data]
B --> C[Secure APIs enable data flow]
C --> D[TPP delivers enhanced services]
D --> A
Behind the scenes:
Modern open finance relies on secure APIs rather than older methods like screen scraping or credential sharing:
- Consumer authorization: You explicitly permit access to specific data
- Token-based authentication: No sharing of passwords or credentials
- Real-time data synchronization: Up-to-date information
- Secure, standardized protocols: OAuth, FDX standards, etc.
This creates a secure pipeline where financial data can flow between institutions without compromising security or placing burdens on either providers or consumers.
Why open finance matters for fintech and digital banks
Interoperability = composability
With secure APIs as building blocks, fintechs can remix services without duplicating infrastructure. This means:
- Instant account linking
- Modular product design
- Embedded finance that lives outside banking apps
Consumer control and literacy
Open finance tools help consumers:
- Consolidate their financial picture
- Understand risk, exposure, and opportunities
- Set permissions and monitor usage
- Take action from a single interface
Product innovation
New tools emerge at the intersection of data and programmability:
- Custom budget apps spanning all accounts
- Robo-advisors with full visibility into liabilities and assets
- Underwriting engines using income + investment history
- Finance-health hybrid products
What open finance unlocks
Smart payouts and condition-based disbursements
Imagine payouts that happen the moment specific rules are met, no batch files or manual steps.
- Insurance claims paid upon claim verification
- Gig wages issued in real time after work completion
- Aid payments released to verified recipients for approved uses
- Rewards programs that trigger based on actual behavior, not arbitrary cycles
Supply chain and trade finance
Open finance transforms how businesses interact across vendors and logistics:
- Pay-on-delivery triggers when goods hit delivery points
- Production milestone tracking to unlock financing
- Multi-party reconciliation flows settled in real time
Embedded treasury automation
Finance teams can program their own guardrails:
- Real-time liquidity rules
- Role- or region-specific spending limits
- Automated FX movement based on market thresholds
Cross-border payments
Using open finance APIs + Lightning Network rails:
- Instant currency conversion with embedded FX logic
- Built-in KYC/AML during transaction flow
- Final settlement with no multi-day reconciliation
Tokenized assets + CBDCs
Asset classes become programmable and auditable:
- Fractional real estate units with built-in investor logic
- Royalty splits distributed automatically to creators
- Government benefits issued with usage rules (e.g., food/housing only)
The role of APIs
APIs (Application Programming Interfaces) form the backbone of open finance by enabling secure, standardized communication between financial institutions and third parties.
Where traditional open finance falls short
Despite API adoption, legacy infrastructure limits what's possible:
- Delayed transaction settlements
- High fees on cross-border flows
- Manual reconciliation
- Inability to program money logic directly into flows
The blockchain + Lightning Network advantage
Blockchain brings:
- Immutable records
- Smart contracts for conditional logic
- Asset tokenization
- Trustless settlement
- On-chain auditability
The Lightning Network adds:
- Instant, low-fee global payments
- Embedded logic at the payment layer
- Infrastructure that works across currencies and borders
- Real-time sync between data + value
Lightspark: Where open finance meets programmable money
At Lightspark, we don’t just build APIs. We’re building the programmable infrastructure layer for the Money Grid.
What we enable:
- Programmable payments with embedded compliance
- Smart disbursement flows (aid, wages, insurance)
- Real-time treasury ops with FX, spend, and liquidity rules
- Integration with existing fintech tools via REST + Lightning rails
Regulatory clarity ahead
Governments are accelerating open finance standards:
- CFPB 1033: Consumer financial data rights in the U.S.
- PSD3: Expanding beyond payments to open finance
- CDR frameworks: Enabling sectoral portability (finance, energy, telecom)
Expect phased adoption between 2024 and 2027, with broader product types (e.g., credit cards, investments) following regulated account access.
Benefits by stakeholder
For consumers:
- One interface to manage all finances
- Transparent data permissions
- Better insights, better tools
For fintechs:
- Rapid product launches
- Accurate underwriting
- Instant programmable settlement
- Lower infra cost
For banks:
- Partner-ready rails
- Data-driven CX
- Reduced scraping risk
- Compliance-friendly data sharing
The programmable layer is here
Open finance redefines what financial infrastructure looks like. But real transformation comes when you combine open APIs with programmable money and instant settlement.
That’s the future we’re building at Lightspark. A future where:
- Payments execute with business logic attached
- Treasury tools self-balance in real time
- Consumers interact through unified platforms
Ready to plug in? Our APIs and programmable payment rails are live. Let’s connect you to the Money Grid.
