The Promise and Perils of Open Finance

57 Pages Posted: 4 Mar 2022 Last revised: 8 Apr 2024

See all articles by Dan Awrey

Dan Awrey

Cornell Law School; European Corporate Governance Institute

Joshua Macey

University of Chicago Law School

Date Written: February 28, 2022


We are at the dawn of a new age of Open Finance. Open Finance seeks to harness the potential of new platform technology to enhance customer data access, sharing, portability, and interoperability—thereby leveling the informational playing field and fostering greater competition between incumbent financial institutions and a new breed of fintech disruptors. According to its proponents, this competition will yield a radical restructuring of the financial services industry: offering more and better choices for consumers looking to make fast payments, borrow money, invest their savings, manage household budgets, and compare financial products and services. The promise of Open Finance is very real. Yet its proponents have largely ignored the economics driving the development of the key players at the heart of this new infrastructure: data aggregators.

Data aggregators are the connective tissue of Open Finance—the pipes through which the majority of this valuable data flows. Like other types of infrastructure, these pipes are characterized by economies of scale and network effects that erect substantial barriers to entry, undercut competition, and propel the market toward monopoly. In the United States, these dynamics are compounded by the highly fragmented structure of both the conventional financial services industry and the emerging fintech ecosystem. The result is an embryonic market structure in which a small handful of data aggregators have a massive head start, and where one in particular—Plaid—arguably already enjoys a dominant market position. This Article describes the promise and perils of Open Finance and explains how policymakers can tap into its potential while simultaneously preventing the abuse of monopoly power and avoiding the creation of a new strain of too-big-to-fail institutions.

Keywords: open finance, open banking, platforms, financial regulation, competition, antitrust, consumer protection, application programming interfaces, machine learning, artificial intelligence

JEL Classification: D4, D53, G18, G20, G23, G28, K20, K21, K22, L1, L12, L17

Suggested Citation

Awrey, Dan and Macey, Joshua, The Promise and Perils of Open Finance (February 28, 2022). European Corporate Governance Institute - Law Working Paper No. 632/2022, University of Chicago Coase-Sandor Institute for Law & Economics Research Paper No. 956, Available at SSRN: or

Dan Awrey (Contact Author)

Cornell Law School ( email )

Myron Taylor Hall
Cornell University
Ithaca, NY 14853-4901
United States

European Corporate Governance Institute ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

Joshua Macey

University of Chicago Law School ( email )

1111 E 60th St
Chicago, IL 60637
United States

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