U.S. Consumer Financial Data Rights are Almost Here
November 1, 2023 | 5 min read
In this post, we will cover:
Open Banking is the structured and secure consumer-permissioned sharing of data via open banking APIs between financial service providers. The definition of Open Banking varies slightly from country to country, but it generally refers to using open APIs to share data between financial institutions and third parties.
Open Banking enables consumers to share their financial data from bank accounts with third parties. This consumer-permissioned data is limited to banking, whereas Open Finance is much broader.
Many organizations use the terms “Open Finance” and “Open Banking” interchangeably. However, there is a small but distinct difference. Open Finance is the next step beyond Open Banking.
Open Banking brings enormous benefits to financial institutions and fintech companies. Why?
Consider your own financial life as a consumer. You likely have a combination of credit cards, debit cards, checking and savings accounts, insurance products, retirement accounts, and more across multiple financial institutions and fintech companies. There’s a lot going on. The typical consumer has an average of 5-7 different financial accounts. And, according to Cornerstone Research, it’s not uncommon for a young couple to do business with 30-40 financial providers.
Open Banking gives you the ability to access and act on your banking data, such as create a single view of your accounts and even make direct payments from these accounts. You can link bank accounts to loyalty programs, share data with accountants and advisors, and more.
Open Banking also creates more choice in the banking products and services you want to use. Data access and portability make it easier for you to shop around, compare products, and find the right banking solution to meet your needs.
For these reasons, the concept of open banking goes beyond financial institutions and fintech companies. More companies are adopting open finance APIs to build and offer digital products that help consumers and businesses understand their financial lives.
Given all these benefits, it’s no surprise that financial services companies, including Visa and Mastercard, are looking to Open Banking. Here are a few examples.
Capital One launched DevExchange with the motto, “Use our stuff to build your stuff.” This DevExchange offers the ability to verify identity and move money via API calls. They also let third parties connect customers with a view of their Capital One accounts and transactions via tokens rather than credentials. In addition, Capital One gives third parties the ability to create accounts directly within these third-party products.
Use cases include integrating wedding registries with a Capital One account and opening a savings account directly within a money management app.
Citi’s Developer Hub enables developers from various digital companies to connect to Citi via API. Notably, Intuit uses this connection to authorize data sharing with Quickbooks and Mint. Quantas uses it for its credit card offerings. And, SingSaver uses it for Instant Account Verifications (IAV) with Citi cards. The offerings in the develop hub vary by country, but Citi allows account aggregation, access to transaction data, authorization, and reward information in many places. By creating this developer hub, Citi is positioning itself for flexibility and stronger connections for its customers who use third-party apps.
If you want to dive deeper, this post covers more banking API examples to showcase what's possible.
If you want to be a leader when it comes to Open Banking and Open Finance, the time is now. Many companies are already making waves on this front, and you can be one of them. When you do, you’ll enjoy the benefits listed above and be ready for the future of banking.
Want to take a deep dive into the world of Open Banking? Check out the Ultimate Guide to Open Banking. It includes suggestions about how to get started, as well as original data points you should consider as you build out an open banking strategy. Download it for free today.
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