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

§ 01 Executive Snapshot

• What: Emerging Markets and Developing Economies (EMDEs) are adopting hybrid or shared liability models in Open Finance schemes.
• Who: Cambridge Centre for Alternative Finance (CCAF), regulatory specialists, and industry experts.
• Why it matters: This approach addresses the unique challenges EMDEs face in establishing liability frameworks that promote financial inclusion and accommodate diverse market participants.

§ 02 Key Developments

• The CCAF report focuses on nine EMDEs: Brazil, Egypt, Ghana, India, Indonesia, Nigeria, Saudi Arabia, South Africa, and the Philippines.
• Panelist Deepti George noted that disproportionate liability could harm entities unable to absorb it, risking their exclusion from the system.
• Nolwazi Hlophe highlighted that regulatory complexity makes it challenging to allocate responsibility in EMDEs, where data moves across various providers.

§ 03 Strategic Context

• Historically, EMDEs cannot replicate the liability models of advanced economies due to limited resources and evolving legal frameworks.
• The integration of non-traditional players like telcos and fintechs is crucial for achieving financial inclusion in these markets.

§ 04 Strategic Implications

• The adoption of hybrid models could lead to improved financial inclusion by allowing a broader range of participants in the financial ecosystem.
• Long-term, this could foster innovation and competition in EMDEs, potentially reshaping how financial services are delivered.

§ 05 Risks & Constraints

• Regulatory complexity poses a significant risk, as multiple regulators may share responsibilities over the same ecosystem, complicating liability allocation.
• There is a risk that the hybrid model may not provide sufficient protection, potentially leading to systemic vulnerabilities if not carefully managed.

§ 06 Watchlist / Forward Signals

• Future developments in regulatory frameworks and liability models in EMDEs will indicate the success of these hybrid approaches.
• The ongoing payments modernization work in South Africa will serve as a test case for balancing liability approaches in Open Finance policy.