Aug 25, 2021

2 min read

What Is Open Finance?

The open finance is not decentralized finance (DeFi).

Open finance refers to the trend of FinTech companies which using blockchain technology and API-based integration with banking services in the traditional financial system. The solutions ensure data transparency to enhance service offerings and enable consumers to make better decisions. However, these are still based on existing centralized infrastructure and legal tender. In contrast, DeFi applications that exist on the blockchain use cryptocurrency and smart contract functions to eliminate intermediaries.

Open Finance

An application programming interface (API) is a set of codes and their underlying protocols used to determine how different software platforms communicate with each other and share information. In the context of open finance, APIs facilitate data sharing between banks and third parties. Through these integrations, Open Finance aims to aggregate consumer data into a fully accessible location.


In contrast, blockchain technology forms the basis of a DeFi service-based platform that only conducts transactions in digital assets. By adopting automatically executed smart contracts, DeFi allows consumers to participate without the need for intermediaries. In addition, many DeFi platforms are non-custodial, which means that consumers have complete control over their funds and data. As of July 2021, the global DeFi ecosystem has locked in more than 20 billion U.S. dollars, and the growth forecast continues to increase.

Although the open finance and DeFi fields are rapidly growing at the same time, the two ecosystems operate independently and provide very different visions for the finance and banking industries. Open finance has increased the convenience and access points of the existing banking system, while the decentralized financial system mainly focuses on digital assets and the development of financial products and services for the new encrypted economy. Although both open finance and decentralized finance are in the early stages of development, it is clear that the powerful financial products can now be stuffed into your pockets.

DeFi may at first appear as a subset of the FinTech ecosystem, but the two are fundamentally different, particularly when it comes to infrastructure, stakeholders, risk, and reward. Open finance, with an app-based experience that improves the user experience and accessibility of the traditional financial system.