The Gaps in Financial Data

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Open access to financial data provides an incredible opportunity for both consumers and businesses. For consumers, it means more context to make better decisions and improve financial outcomes. For businesses, it provides opportunities to uncover new revenue streams, analyze consumer behaviors to deliver better experiences, and drive innovation. 

The good news is that there is a ton of financial data that financial institutions, fintechs, merchants, and other businesses generate and can leverage. In fact, here are a few stats that demonstrate just a portion of the financial data out there:

• The National Automated Clearing House Association (NACHA) reported 29.1 billion ACH Network payments in 2021, an increase of 2.3 billion payments over the previous year.
• The Society for Worldwide International Financial Telecommunications (SWIFT), the system banks use to securely send messages to each other, recorded an average of 45.9 million FIN messages per day in just the month of February 2022.
• There were 368.92 billion purchase transactions for goods and services worldwide in 2018, according to 2020 research from The Nilson Report. If you divide that figure by 365, roughly 1.01 billion credit card transactions occur every day around the world.

Think about it this way:

The amount of financial data generated by each person in a single year is greater than the number of miles it takes to travel to the moon.

The average consumer has an average of 5-7 different financial accounts. If there’s just one transaction each day on each account, that’s at least 1,825 transactions each year with a host of data behind each one, including transaction amount, merchant name, location, account type, account number, the consumer’s name, and contact information, etc. — the list goes on. And, according to Cornerstone Research, it’s not uncommon for a young couple to do business with 30-40 financial providers. That’s hundreds of thousands, perhaps millions, of financial data points per person every single year. 

The current financial industry challenge isn’t finding data — it is reliable access to and unlocking the value of that data. To solve this challenge, financial institutions and fintechs need to become data companies. But what does that mean?

Unlocking the Value of Financial Data

To close the value gap in data, becoming a data company means embracing Open Finance. MX defines Open Finance as the ability to access and act on financial data to create personalized experiences, increase the pace of innovation, and drive industry collaboration.  

Open Finance means that companies, financial and otherwise, can build and offer consumers and businesses digital products that help them understand and manage their financial lives better. With Open Finance, financial institutions and fintechs can:

• Proactively Support Money Management
• Deliver proactive alerts and notifications to help consumers better manage their finances and avoid things like a surprise overdraft fee. In fact, MX found that 63% of consumers want their financial service providers to proactively help them better manage their finances.
• Mitigate Fraud and Risk
• Gain better visibility into consumer spending patterns to manage risks, and quickly and easily identify abnormalities.
• Enhance Business Opportunities
• Uncover new revenue streams, improve operational efficiency, and gain insight into potential partnership opportunities.
• Deepen Customer Relationships
• Provide better, more personalized offers and recommendations to consumers.
• Improve Digital Experiences
• Create unique and personalized experiences based on consumer spending, saving, and borrowing. 
• Drive Financial Wellness
• A recent MX study found that 70% of respondents expect their financial service providers to give them personalized notifications and insights. Help consumers reach their financial goals with predictive insights that provide guidance on the next steps to take toward greater financial wellness. 
• Gain Efficiencies 
• Reduce the time and resources needed to organize, review, and standardize financial data in a way that can be consumed and trusted by internal teams.

Solving Critical Needs with Open Finance

The ability to offer next-level financial products and services revolves around making the most out of the data provided. Where companies fall short is placing emphasis on the less-valuable data points — the data that doesn’t provide a complete view of the financial profile for a consumer. The data value gap boils down to two critical needs that are solved through Open Finance:

1. Enabling a complete picture of a consumer’s financial life

Historically, financial data has primarily been accessed through screen scraping or other inconsistent methods that don’t show the big picture of the consumer’s data, nor provide data in a usable state. This leaves financial institutions and fintechs without a complete picture of the consumers finances.

The reality is consumers are sharing their data, but the lack of secure and reliable access is creating a poor experience that reflects badly on financial providers and prevents an accurate picture of their consumers. As a result, the financial industry is missing out on opportunities to better target and segment its consumers, drive additional value with personalized, proactive insights and recommendations, and ultimately, create lasting brand loyalty.

2. Adding context to data to make it useable and actionable

Data without context is meaningless. Similar to other forms of unrefined resources, you need to pass data streams through secure layers that can cleanse, categorize, and add context to the data. 

Without cleansing, categorization, and context, consumers are left with indecipherable financial data that can drive false alarms (of fraud), frustration, and an influx of inaccurate alerts and irrelevant segmentation. And, for the business, it means decreased customer satisfaction, missed lending opportunities, and more resources needed to identify and manage fraud concerns.

About MX

MX Technologies, Inc., a leader in Open Finance, makes data accessible and actionable for everyone. We are building the largest open finance ecosystem to help drive innovation and improve experiences through secure and reliable access to financial data. MX combines trusted open finance APIs with enhanced financial data to quickly and securely connect to and verify data for hundreds of use cases including account opening, money movement, and underwriting.