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Beyond Open Banking: Is Open Finance just for Finance Companies?

May 17, 2022 | 0 min read

Open Banking in the U.S. is driven first and foremost by the market, according to David Whitcomb, vice president of Product at MX, on a recent episode of the Finovate Podcast. As financial institutions and fintechs embrace open finance APIs, there is an increase in competition that drives better outcomes and more choice for consumers. 

At the same time, the concept of open banking goes much broader in the United States. MX sees investment and insurance companies, as well as other realms like payroll, adopting open finance APIs — not just banks and credit unions. 

With Open Finance, companies, whether they're financial services companies or not, can build and offer digital products that help consumers and businesses understand their financial lives. For example, MX is currently working with an employee benefits provider who's seeking to understand the financial health of the employees at the companies it serves and help those employers understand how the products they’re pushing out are getting used by their employees. 

“Financial wellness will take a broader part of everyday activities and not just be bound to a banking application,” says David. “So we think there's a lot of places where Open Finance is going to drive new solutions.”

Other countries and regions like Europe may be further along in Open Banking but America has an advantage because of broader use cases like this, even if the U.S. is behind on formal regulations. Regulations are coming but they are the stick, not the carrot. 

The ultimate benefit of Open Finance is from a competitive advantage and strategic perspective. Simply put, customers are demanding access to their data and they are going to engage outside of their primary bank’s digital walls. The differentiator with Open Finance is financial institutions are able to use financial data to see where consumers are connecting their bank accounts — whether that’s financial wellness apps, investment apps, or loan apps. This provides a fantastic opportunity for financial institutions to create solutions that will keep consumers coming to them, rather than looking externally. 

Financial institutions can use open finance APIs to make sure that the connection experience is good and then, understand where consumers are connecting to identify patterns and opportunities to deliver better services and experiences that meet those needs. 

Listen to the full Finovate podcast episode with David Whitcomb and Greg Palmer for more perspectives on Open Finance and Open Banking.

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