Open innovation: trends in the financial and insurance sector

By Paolo Tanfoglio, CEO of Lokky

More and more Italian companies and organizations recognize the Open Innovation model as a competitive value on the market; in light of technological progress and the tendency of the corporate world to offer increasingly personalized and tailor-made services for its customers, it has been realized that the paradigm of «closed innovation» – i.e. the use of tools and know-how exclusively within the confines of the company – is no longer enough.
It has been understood that to grow it is necessary to also embrace an open innovation model, through scouting for ideas, solutions and technologies present in external ecosystems, such as – for example – startups, academic institutes and bodies. Incubators, partnerships, acquisitions, calls for ideas are some of the tools used by companies to innovate their positioning on the market. Furthermore, in a highly regulated area with a high technological component, a model based on Open Data – made available by the various ecosystem players – allows us to intercept and anticipate market trends.

Open Innovation is expressed in the financial and insurance sector, through Open Finance and Open Insurtech. In Europe, this market has over a thousand companies offering 256 financial and insurance services, which represent 41% of the total insurance and financial services.
Open Finance is certainly a rapidly growing trend: the entry into force of the EU Psd2 regulation marked, in fact, a turning point in the market, stimulating competition and opening the doors to new players. This is also demonstrated by the data from the Global Open Banking Report research by Cbi-Pwc: in 2021 alone, merger and acquisition operations were recorded in the sector for around 2 billion euros and, in addition to the almost 4,000 Accounting Servicing Payment Service Providers, the number of Third-Parties has grown, which to date are around 500, with a +300% since 2019. Although in the current Italian context the phenomenon is still lower than in other European realities, it demonstrates ample margins for growth and development.

Open Insurance is also recording a progressive growth trend. Data from the Italian Insurtech Association testifies to the boom in the sector: in the first quarter of 2021, companies not belonging to the insurance world – which have integrated their services with an insurance offer – grew by +426% compared to the first months of 2018. Furthermore, it is estimated that the market will reach up to +20% of the total insurance market value in the next 10 years, for a market whose value is listed between 3 and 5 billion euros only in Italy.

As further evidence of the growth of these ecosystems, the research launched by Fabrick, Illimity and The European House Ambrosetti shows that 100% of Fintechs have revealed that it is essential for their business to create partnerships with other players and, in fact, 70% of them have already implemented or intend to implement forms of integration of third-party products/services, considering external agreements as key to improving commercial effectiveness. Finally, in the next 3 years, as many as 43% of the Fintechs interviewed believe that it will be an integral part of an ecosystem.