Exploring the Intersection Between Open Banking and Insurance: Emerging Revenue Opportunities (Part 1)

In light of the looming regulations of Section 1033 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank 1033) set to take effect in 2026, many industries are watching the open banking landscape with an eye toward opportunities to drive technological innovation or to open new streams of revenue.

The provision itself is designed in part to better facilitate open banking by allowing consumers to share their financial data with third-party data providers in a standardized format. It also provides FinTechs and authorized third parties with similar access. Taken in tandem, Dodd-Frank 1033 should have a profound impact on retail banks, credit unions and organizations that process payments, like insurance providers. In addition, it should also drive a variety of consumer benefits.

To understand the full potential of the new regulations and the opportunities they will help make available, we caught up with EPAM’s Global Head of Open Banking and Payments, Alistair Brown, and Manager of Business Consulting for Insurance, Patrick Hughes.

Alistair, how is open banking poised to serve as a driver of revenue in the financial services industry, both in the US and on a broader global scale? 

Alistair Brown: To set the stage, open banking was initiated by the European Union with the introduction of the Single Euro Payments Area’s Payments Services Directive (SEPA PSD1) in 2007. Its ambition was to establish the legal foundation for a single market for payments in the EU and, in so doing, to introduce greater competition, engender innovation and ensure consumer safety. Through iterative experimentation and mistakes-made learning, PSD1 was enhanced by PSD2 and 3 bringing in further business models and enhancing consumer protection as the ecosystem developed. Today, Dodd-Frank 1033 is the beneficiary of that set of experiments, and it will add enormous value to the US market through data sharing, increased competition and a new market for supplementary services to existing bank account holders.

Imagine you've been banking with the same bank for 20 years. In the US, you've likely insured yourself separately with an unaffiliated organization. Perhaps you've mortgaged separately with another organization. But at their core, these are all financial services. The thinking here is that if you interconnect this entire set of services — imagine it as a hub-and-spoke arrangement — then the information flow fostered by 1033’s open banking and data sharing provisions means that the consumer has far easier access to information regarding a wide array of services.

It will enable greater competition and better deals for the customer. In other words, insurance is cheaper, the mortgage is better suited for that individual. We live in an era where we imagine that all of these things are available at the touch of a button, but effectively, if you can have all that information available on-demand, ideally through a mobile phone, then off you go once these things are established via these Dodd-Frank provisions. It can include your pensions, your insurance, your mortgages and so on, and the list of different elements gets longer as time goes on. 

No longer are banks just in a relatively narrow space, providing a relatively narrow set of products.

Effectively it throws the whole thing wide open, thanks to these secure, standardized protocols for sharing data.

Patrick Hughes: By building these secure connections, insurance carriers can increase revenue in three big ways. The first is through data-driven product development. By accessing a wider range of customer data, carriers can better understand customer behaviors and needs, which opens the door for the development of new and improved underwriting models and personalized coverage activities that are increasingly competitive from a pricing standpoint. This might involve innovative, use-based products targeted toward the gig economy. This might involve wearable devices, or geofenced home and property products. This could even include health and wellness-based products for life and benefit carriers. 

The second stream to boost revenue will revolve around the ability to establish partnerships with InsureTechs to drive more cross-sell opportunities. Similar to the banking industry, insurance carriers aren't going to build all of their products and services in house. Instead, they can partner with the established InsureTechs and startups that are driving change and offering new approaches and technological solutions to provide insurance products. 

Similar to the change we’re seeing in the financial services industry, insurance companies will be able to connect to more digital platforms or marketplaces to provide new embedded insurance products. This could be at the point of sale on anything from airline travel to product warranties to other value-added services.

And finally, through open banking, carriers can monetize their data assets and create recurring revenue streams by partnering with FinTechs and data aggregators that can sell anonymized data to third parties — for example, market research consulting firms. The carriers can even license out their data to FinTechs and other industry players to help boost revenue.

What other opportunities will the proliferation of open banking make possible in both the financial services and insurance sectors? Where do you expect the two industries to really intersect?

AB: For decades, there's been a lack of interaction between these types of organizations — financial services institutions and insurance carriers — even though they are providing similar services to the same set of people.

The logic goes that if we can start to break down these silos, then we can introduce broader consumer opportunities. We are finally placing the consumer at the center and enabling their more informed choice. However, getting there will require a bit of work.

It’s no great secret that banks are notoriously conservative and risk-adverse, which will, of course, drive some hesitancy around opening their doors and data to the insurance carriers. However, in the long term, they stand to gain access to a greater volume of activity, as they’ll be viewed as this central repository of consumer spending data and insight. And as noted, the strategic use of this data should open more opportunities for the consumer. 

PH: I completely agree. First and foremost, we should see a lot of data-driven, customer-centric innovation offering more freedom of control to the consumer. I expect we’ll also see a rise in financial literacy as consumers begin interacting with more open and transparent marketplaces for rates and services.

What’s really exciting, from my perspective, is what comes next for API-based ecosystems, especially for the large financial institutions where so much of this data will originate to help fuel all these new digital ecosystems. The volume of global API calls is forecasted to grow between 400%-600% by 2027 — essentially a year after the Dodd-Frank 1033 provisions go into effect in the US.

These digital ecosystems will need to be buffed out and matured in a very large way. From an insurance perspective, carriers will face a lot of pressure to compete and offer products and services in this open banking marketplace. This will also force them to really mature their internal data capabilities and form relationships with data shops, InsureTechs and FinTechs to stay ahead of the competition.

AB: To build on Patrick’s point, on both sides of the pond, there's long been this tradition that says, as you go through your teens as a young consumer, you bank with the same institution your parents use, and you insure with the same company your parents use and so on.

Why not make the choice so much more transparent and clearly explained? The promise of open banking is that people will have access to information and marketplaces that allow them far better choices, that allow them to choose products and services that are much more tailored to their needs and goals. 

It’s a brilliant position to be in and it's not really something that was possible until very recently in Europe. And that’s what Dodd-Frank 1033 will bring to the US. It’s going to be a very interesting time.

PH: Exactly. Data-driven, open marketplaces for services like car insurance, life insurance, investment accounts and a whole lot more ultimately mean one thing: the consumer comes out on top. It’s going to be an exciting, busy time for both the financial services and insurance industries in the years ahead.

Want to dive deeper? Stay tuned for part two of this interview series where our experts will explore the impact of consumer financial data and its implications on automation and personalization.