Key Insights from Money Experience Summit 2022
This year’s Money Experience Summit 2022 brought together more than 500 leaders, innovators, and experts across finance and fintech to discuss the challenges and opportunities ahead for the industry. While the future isn’t set in stone, it’s clear that Open Finance will shape the path forward in 2023 and beyond, driving new innovation and outcomes for financial institutions, fintechs, and consumers.
The Open Finance Ecosystem Takes Root
As an industry, we have the opportunity to transform the lives of literally billions of people. The next year — and the next decade — will reshape our industry as one of collaboration. Open Finance has the power to enable everyone to access and act on financial data to build personalized experiences, increase the pace of innovation, and drive industry collaboration.
MX CEO Jim Magats shared his personal experience managing accounts with 15+ financial providers: “It’s hard for people to know what is happening with their money. And, there is a strong reluctance from many parts of our ecosystem to share data. We haven’t made it easy to share data technologically, and once we have the data, it’s not easy to understand what that data means. The result is that the average consumer, financial institution, and fintech are effectively financially illiterate.”
Today’s fragmented money experience is going from a nuisance to an imperative that we must solve. As technology advancement continues, this problem will only get worse and needs to be addressed. We have an imperative to work together to make financial data globally available and accessible in a customer-permissible environment.
Penny Lee, CEO of the Financial Technology Association, says, “We all have to come together over the sharing rights of data and recognize that consumers do own the rights to their data. . . There is a working relationship [between banks and fintechs] and we need to be able to advance innovation on behalf of all consumers, irrespective of whether you are a financial institution or fintech provider.”
Keynote speaker Jacob Morgan, principal analyst at Forrester, likens the opportunity to a forest. A lone tree simply will not thrive. Trees thrive collectively, with their own form of communication. They form an ecosystem and look after their environment, protecting each other and sharing nutrients. They form a connection. This model for success is true in everything. It’s all about connecting things, people, resources, and yes, data.
“We are building a forest, not a palace. Rather than establish everything by ourselves, we create an ecosystem that nurtures things to grow within it.” – Xiaolong Zhang, founder of WeChat (as quoted by Jacob Morgan, Principal Analyst at Forrester, in his speech)
Collaboration is intrinsic to the future of financial services. Multiple industries will need to come together to drive open finance and open data. In the future, the firms that thrive are those who think about connectivity. People who collaborate, aren’t afraid to go out to the ecosystem, and create win-win value propositions. It’s about weaving together constellations of services and offerings to meet consumer needs. It requires a different culture and a different way of thinking.
Entering the Age of Open Data
“Open data is the single best opportunity we have as an industry to improve customer outcomes,” said Simon Taylor, head of strategy at Sardine.ai and co-founder of 11:FS. “But so far all we’ve done is get more people into debt and streamline onboarding.”
While this is a provocative statement, it’s accurate from a 30,000-foot view of the financial industry today. Open data has enabled financial providers to more quickly and effectively onboard new consumers, as well as lend to consumer segments with low or no credit scores that were previously underserved by lenders. But we can do more…
The 2020s will be the decade of data, unlocking the ability for us to focus on creating great customer financial outcomes. When we do this, what is better for the consumer will be better for the industry.
MX CEO Jim Magats calls for us to think about simple, yet powerful, examples of what data could unlock. It could mean no more…
- Passwords: Financial transaction data could be used to authenticate consumers. For example, choose an image of what you bought at Starbucks today versus remembering some password with at least 12 alphanumeric characters.
- Bill Payments: A collective of historical data, linked with bill payment invoices, could be brought together to allow a consumer to automatically pay their bills without having to look at them.
- Overdrafts: Financial institutions could create a holistic view of their customer’s financial positions across all financial institutions and automatically move money in and out of accounts to ensure no overdrafts.
- Manual Investments: Consumers and businesses could instruct their collective financial institutions to work together to automatically invest money, for example, like a corporate treasurer sweeping excess cash balances into higher interest accounts. Why can’t the same automatically happen for a consumer?
According to Brett Allred, Chief Innovation Officer at MX, by bringing Open Banking to every financial account provider in the United States and Canada, we can unlock a vast reservoir of incredibly powerful data to build amazing data-driven experiences.
That said, data without context is useless. To unlock the value of data, it comes down to three things:
- Aggregate multiple sources of data: Create a more holistic picture of a consumer’s finances by bringing together different sources of data.
- Cleanse and categorize data: Translate transaction data by cleansing and categorizing data into understandable information.
- Create experiences: Make data more helpful by enabling experiences and recommendations based on the insights from the data.
In this age of open data, financial institutions can regain their position as the cornerstone of consumers’ financial lives. Fintechs can innovate faster and solve big problems in partnership with financial institutions. And, money will no longer be the No. 1 source of stress for consumers.
The Human Element of Technology Innovation
“Money is one of the scariest things that people deal with,” said Parilee Edison Wang, head of product at Alloy. Over the past two decades, technology has further complicated consumers’ financial lives and has made interacting with money even scarier.
Coupled with the recent COVID-19 pandemic, rising inflation, and higher costs for everyday items, today’s financial picture for consumers is often like an edition of “Where’s Waldo?” when we go looking for our money. It’s harder to manage our money, and it’s harder to know where our money is going.
“It’s important to remember that people are involved. This is often forgotten in conversations about technology.” -Adrian Haro, CEO of The Workers Lab
The way consumers earn, save, spend, and invest money has fundamentally changed while many financial processes remain stuck in the past. For example, gig workers often work without the safety net of traditional benefits like healthcare, retirement, and more. The best indicator of financial behavior is simply financial behavior. And, sometimes the best innovation is improving a current solution rather than creating something new.
The complexity for us lies in providing a simple user experience for something that is very complicated, according to Rhett Roberts, co-founder and CEO of LoanPro. Historically, banks and other financial providers are divided into different services. You go to one department for your mortgage and another for your savings account. But in everyday interactions, would you go to a coffee shop and order from two different lines if you wanted both a coffee and a sandwich? You wouldn’t be ok with being transferred to a sandwich specialist. You’d simply order what you want and expect it to be delivered.
The next wave of innovation will require financial providers to increase their focus on personalizing technology and humanizing processes to make it more accessible and frictionless for consumers. But there is no one-size-fits-all approach to this. Ankit Bhatt, EVP, Consumer Chief Digital Officer at U.S. Bank says it simply: . . . Even with all the data, all the knowledge, and all the best in class experiences, every individual is different.
According to Jacob Morgan from Forrester, there are four clear themes that will influence this decade of innovation. In the future, financial services will be:
- Invisible: Seamlessly embedding and integrating financial services into business processes, such as delivery via intelligent agents, or a shift in distribution models.
- Connected: To remain relevant, financial providers must be present in the ecosystems and products that customers use.
- Insights-driven: Driving value for consumers by unlocking insights and recommendations from financial data.
- Purposeful: Aligning values and services to the values and needs of the consumer and the planet.
The Speed of Innovation
Speed is one of the hardest things to achieve in the financial industry but also one of the most important. For financial institutions and fintechs, speed will be a critical factor for the next decade, in more ways than one.
Meeting Consumer Expectations
“You can get a massage on demand in under 30 minutes in most metropolitan cities but you can’t get your own money back faster than T+5.” -Stephany Kirkpatrick, founder and CEO of Orum
We live in the age of Instacart, DoorDash, and same-day shipping from Amazon Prime. Yet, many financial services and processes can still take hours, days, or weeks to complete. Leaders across banking, fintech, payments, and lending all point to an increased need for speed to meet consumer expectations when it comes to account opening, money movement, and more.
According to Stephany Kirkpatrick, founder and CEO of Orum, “real-time payments and FedNow exist but are significantly underutilized and underadopted.” Speed matters for the end user because they need their money. Every generation going forward is going to expect money to move fast, says Larry Talley, founder and CEO of Everyware.
Providing Data Access
According to Jean-Paul LaClair, director of financial wellness and open banking at USAA, it’s not just the speed of moving money, it’s the speed of moving data. When you start complicating your architecture and data stores, the question is how you enable that seamless flow of data. Open finance APIs can enable more real-time data sharing and enable a broader view of a consumer combined with that data infrastructure and personalization based on insights from the data.
Managing Risk and Fraud
Faster payments don't equal more fraud. The financial services industry has an opportunity and a requirement to get better at managing and verifying identities. If you have identity verifications nailed, we can do a better job collectively of keeping bad actors out of the system. Instant account and identity verifications are getting stronger but there is still more work to be done.
Larry Talley, founder and CEO of Everyware, compares this process to the security lines at the airport. Those who have Transportation Security Authority (TSA) pre-check or use Clear can get through the lines much faster and are essentially, “double verified.”
Ten years ago, the cable industry went through a period of disruption that completely transformed how consumers interact with television, now using streaming services like Netflix, Hulu, and Disney+ over traditional or legacy forms of cable services. Today, the banking industry faces the same threat, according to Tanya Van Court, founder and CEO of Goalsetter.
Bottom line? Tanya says failure to transform quickly gives the competition a growing advantage, and will potentially cede the entire industry. Speed kills. Banks building what they need could take longer than they have. Significant market share is lost while you’re figuring out how to compete.
“Speed and scale are imperative. You can’t have legacy systems in the back office and serve the future of embedded banking going forward." - Jim Marous, co-publisher, The Financial Brand
The Financial Wellness Imperative
Sound financial wellness continues to be as important as ever, says Crystal Anderson, vice president of product at MX, as inflation recently hit a 40-year high, fears of a recession loom, and Americans report money is their leading cause of anxiety and stress.
Recent research from MX shows:
- 40% of consumers surveyed believed their financial situation has changed for the worse compared to last year;
- 48% said thinking about money makes them anxious and is their primary source of stress; and,
- More than 37% of respondents are not confident they can cover unexpected expenses.
There is a real opportunity to improve the confidence consumers have in their financial experience. Financial wellness is about creating resilience to financial shocks and meeting daily obligations. The Financial Health Network measures financial wellness across 4 dimensions: Spending, Saving, Borrowing, and Planning. Positive financial behaviors can mean everything from spending less than you make to paying bills on time and in full. One of the biggest leading indicators of financial wellness is having a plan, which can help consumers prepare for expenses and weather the next wave of financial uncertainty.
Financial institutions and fintechs have a tremendous opportunity to strengthen consumer relationships by helping them create a plan and achieve financial wellness. In 2023, financial providers should focus on 2 key areas:
- Data: Organizations that will make a difference will make it easy for consumers to see and understand their financial data. This includes both enabling consumers to bring together their various financial accounts into a single view and ensuring data is cleansed and categorized to make it easy to understand.
- Personalization: Providing the data is just the first step. Consumers also want personalized notifications, products, services, and recommendations to help them better manage their money. Financial wellness isn’t a universal definition. It is individual to the consumer and the problems they need to solve. Financial priorities will look different for each consumer depending on their current situation and lifestyle.
Chris Courtney, head of science, risk and analytics at Happy Money says, “You don’t change behavior just based on a loan. You have to attack the root causes and develop a system that puts people on a trajectory for success.”
Building Purposeful Relationships
Empower the world to be financially strong. This isn’t just a statement on a wall at MX — it’s a mission woven into the fabric of every employee, every product, and every interaction. And, many banks and fintechs have similar missions to make lives better, make dreams come true, or power human potential.
Building purposeful relationships with consumers will continue to prove a winning strategy in making these missions a reality. MX research shows that trust is one of the top deciding factors for Gen Z and Millennials in choosing their financial provider.
In 2023, financial institutions and fintechs should focus on 2 areas of opportunity to build trust:
Data Connectivity: Gil Brodnitz, Chief Technology Officer of U.S. Financial Services at Microsoft said it best: Every time I login to onboard a new fintech, I’m nervous about how much data I am sharing or signing up for. It is a minefield when it comes to sharing data and connecting accounts.
We need to make financial account linking more reliable and more secure. The old way is to capture the users credentials, imitate the user in online banking, and scrape the data. The new way is to redirect the user to your online banking site or mobile banking app, authenticate the user, then provide tokenized access to the data.
This new way of sharing data is far more reliable and secure. Over the past year, we’ve seen dozens of institutions launch Open Banking programs and drastically improve the security of the financial accounting linking experience.
MX estimates that more than 470 million retail accounts in the United States are now accessible via open banking APIs. This is incredible growth from where we were as an industry just a few years ago. We see a future, not far off, where every provider of a financial account will leverage Open Banking and allow secure user-permissioned data sharing.
Data Context: According to Brent Chandler, founder and CEO of FormFree, trust is something earned. It’s a relationship proven over time. Data can help empower that consumer but if they don’t actually know how to use it, it’s sort of lost.
Consider, for example, more than 41% of Gen Z respondents said that in the past two years they’ve seen a transaction on their financial accounts they didn’t recognize. This can be a huge source of anxiety for consumers who are left wondering if a transaction is legitimate or a fraudulent charge on their account. We have to provide the right context for consumers in these types of scenarios. Actionable insights and context can improve customer satisfaction and loyalty — creating positive outcomes for both consumers and businesses.
“Relationships still matter. We forget that we’re all humans and relationships are what makes the world go round.” -Ankit Bhatt, EVP, Consumer Chief Digital Officer, U.S. Bank