EMDEs adopting ‘hybrid’ or ‘shared’ liability models in Open Finance schemes

Establishing liability in Open Finance ecosystems in emerging markets and developing economies (EMDEs) is “more nuanced” and requires “hybrid or shared-liability” models, according to panellists speaking at the launch of a new report from the Cambridge Centre for Alternative Finance (CCAF).

Using a framework based on three interconnected “pillars” – incentives, liability and performance measurement – the report examines what enables Open Finance ecosystems to develop and achieve sustainable impact in EMDEs.

CCAF, which focused on Brazil, Egypt, Ghana, India, Indonesia, Nigeria, Saudi Arabia, South Africa and the Philippines for the report, found that many of these EMDEs face limited resources, “stretched” regulatory capacity, and legal and data protection frameworks that are still being developed.

As a result, they cannot necessarily replicate the models adopted by advanced economies.

Speaking to Bill Roberts, honorary fellow at the CCAF, during a panel discussion at the launch of the report on 23 June, Deepti George, founder of Yutadhi, said that establishing liability in Open Finance schemes is “more nuanced”.

She also highlighted potential “harm” to the system “if disproportionate liability falls on entities that don’t have the balance street strength to absorb it”, adding that countries “don’t want to end up crowding them out of the system”.

Nolwazi Hlophe, senior specialist at the Financial Sector Conduct Authority, observed that high-income regions, such as the UK and Europe, typically enforce “strict, regulation-led models with clear legal liability shifts, primarily to drive competition”.

“In contrast, EMDEs tend to use hybrid or shared-liability models because our main goal is financial inclusion, which means integrating a wider mix of non-traditional players like telcos and fintechs,” she explained.

Hlophe noted that the biggest factor behind this is regulatory complexity.

“As data moves across a wider chain of providers in EMDEs, allocating responsibility gets much harder – especially when multiple regulators share a mandate over the same ecosystem,” she added.

“That’s exactly what we’re navigating in South Africa right now; we are using our ongoing payments modernisation work to test how best to balance ex-ante (preventative) and ex-post (redress) liability approaches before we formally lock in our broader Open Finance policy.”

“Open Finance is being shaped in emerging markets and developing economies as much as anywhere else, yet regulators there face choices that cannot simply be borrowed from advanced economies,” said Bryan Zhang, co-founder and executive director of CCAF.

“This report shows that incentives, liability and performance measurement are interdependent, which means progress in one area can help offset constraints in another. That gives regulators a practical way to sequence reform under real-world constraints.”

The CCAF report, ‘Enabling Open Finance in EMDEs: Incentives, Liability, and Performance Measurement’, has been produced in collaboration with the Bank for International Settlements, with the support of the UK Foreign, Commonwealth and Development Office.

Further reading: Financial Conduct Authority unveils UK’s Open Finance roadmap to 2030