For decades, data has been the lifeblood of the financial industry, and as banking becomes increasingly open, the value of data will only become more pronounced. Consumers want the ability to quickly, seamlessly, and securely put their data to use in ways that empower them to be financially strong. All of this requires a modern approach that goes beyond just taking data from point A to point B to instead enhancing the data, enabling permissioned-based use, creating bidirectional data exchanges, and optimizing for security. This white paper introduces this new approach to aggregation called modern connectivity.
Executive Summary: Features of Modern Connectivity
- Tokenized, credential-free connections
- Solutions at each level of integration: infrastructure level, API level, aggregation level, and the UX level, giving a full value chain delivery model
- Intelligent routing to a host of connectivity methods for complete coverage and an enhanced user experience
- Developed and deployed quickly
- Enables bidirectional data exchange between financial services providers
A Brief History of Connectivity
Almost as soon it was possible for the public to view financial account data online, people have wanted a way to see all their accounts in one place. This process — known as financial account aggregation — started in the mid-1990s with the rise of a multiplicity of aggregation standards, including Intuit’s open exchange (OE) and Microsoft’s open financial connectivity (OFC). By 1997, companies had started to unite around the open financial exchange (OFX), a standard driven primarily by the team at Microsoft Money.
While OFX connections have usually proven reliable, the standard hasn’t been consistently maintained (with years between updates), the versions vary considerably, and the desired fields aren’t always populated. In addition, the connections require formal relationships with financial institutions.
For these reasons and more, the bulk of external financial account connections today occur via screen scraping — the process of gathering data from one app by inputting user credentials (such as username and password) and displaying that data in another app.
However, the process of screen scraping also carries a range of shortcomings, especially when the connections aren’t whitelisted. For instance, screen scraped connections can frequently break, and they carry an element of risk as consumers share their credentials, which potentially increases risk across the ecosystem, compromise privacy and pose security threats for everybody involved — the fintech, the financial institution, and the consumer.
Modern Connectivity: The Future of Finance
Because of these shortcomings, MX is working to provide access to tokenized, credential-free API connections that use OAuth 2.0 protocols and are built with the highest security standards.
This modern approach provides customers with the ability to approve, manage, and revoke access to their financial data. As financial institutions deploy new, modern data sharing services, MX is securing data sharing agreements, building connections, and migrating users faster than any other provider in the market.
The appeal of modern connectivity becomes clear in contrast with the legacy approach of screen scraping, which is less secure (as customers must share credentials) and intermediary controlled.
Fortunately, the number of modern connections via MX is growing quickly because we have tools to give a financial institution an internal API that ties together their tech stack and because we also provide them with an external API — an open banking connection that allows them to easily launch open banking initiatives so they can control and permission who has access and what they have access to. These partnerships allow us to make millions of calls that are tokenized, credential-free connections.
Data Aggregation: Legacy Connectivity Vs. Modern Connectivity
The Benefits and Future of Modern Connectivity
The benefits of modern connectivity are wide-ranging. For instance, it provides people with access to all of their financial data in a single view. With this complete view, people can know their total inflows and outflows at a glance and make smarter decisions as a result. In addition, with the right AI and machine learning technology, modern connectivity enables people to receive personalized financial guidance. (After all, it’s hard for a financial wellness app to make accurate predictions if it’s missing critical information about certain accounts.) Put simply, modern connectivity finally gives people the ability to experience true financial strength from their digital tools.
What’s more, modern connectivity also simplifies the process of verifying accounts compared to the legacy process of using microdeposits. Rather than waiting 1-3 days to verify someone’s identity (and risk the possibility of customer abandonment during the onboarding process), modern connectivity enables reliable instant account verification with speeds averaging 3 seconds.
Finally, modern connectivity positions companies to lead the future of open banking and open finance. Our Ultimate Guide to Open Banking illustrates how companies can invest in innovation, embedded finance, and new revenue streams by leading on this front — especially by enabling bidirectional data exchange, which empowers companies to make use of data they didn’t previously have access to. As more and more people demand the ability to use their data how they see fit, the future of banking will increasingly be open and, by extension, rely on modern connectivity.
“Modern connectivity is so much more than checking a box,” says David Whitcomb, VP of Connectivity at MX. “It’s connectivity with a purpose. It’s connectivity that doesn’t just make access to a product possible — it makes a product better.” That’s the key benefit of modern connectivity: It opens up new opportunities.