Today’s money experience is inherently messy both for consumers and financial providers seeking to meet increasingly complex consumer needs. Consumers must look across a multitude of financial accounts to try to manage their financial life. On the other side, financial providers only glimpse a fragment of a consumer’s financial picture and lack visibility into where consumers are sharing data from their systems with others.
Most financial data sharing still relies on less reliable and less secure methods that require consumers to share credentials with a third party. Connections frequently break and consumers are left wondering who has access to their data while businesses have little visibility into where data is shared. This leads to frustration and could potentially cost businesses customers in the long run. In fact, research shows 72% of consumers would switch financial providers if they were unable to connect to their preferred financial app. The financial industry can do better.
A Disjointed Money Experience for Consumers
Consumers maintain relationships with an average of 5 to 10 different financial services organizations, from their primary bank to PayPal and Venmo to various credit cards, investment accounts, and loans.
Our latest survey of 1,000+ American consumers found that most consumers do not have a good way to track and manage their finances. Nearly half (45%) only check finances through their financial accounts — meaning they must look across multiple providers to try to get a full picture. This is even higher among older generations. What’s more, nearly 1 in 5 are using a budgeting tool or app to track their finances (19%) or a spreadsheet or other manual process to track their finances (18%). And, nearly 1 in 10 respondents stated that they do not track their finances at all.
We’ve all heard the expression that knowledge is power. Without a complete 360-degree view of their finances, consumers do not have the data they need to truly manage their finances or reach their financial goals. Engaging with their finances on multiple platforms means they don’t have a consolidated view of their financial data or who may be accessing it.
If they choose to share their financial data with a financial provider, they are most likely opening themselves up to increased risk by sharing credentials with third parties and giving them access to systems that are not meant to be shared.
A Fuzzy View for Financial Providers
On the other side, data providers like financial institutions and fintechs don’t have visibility into where their consumers are sharing their data or what tools and services they are using. Without this view, financial providers can’t deliver the secure, personalized experiences their consumers want and need.
Today’s fragmented money experience isn’t just a nuisance for consumers. It is a challenge that financial providers must solve to ensure they can protect and safeguard consumer data, truly understand their consumers, deliver personalized offers and experiences to engage and retain customers, and drive better decision making to grow their business.
The majority of financial data sharing is still done through screen scraping, which is less secure, limits the visibility of financial institutions to see where their customers share data, and requires consumers to share their usernames and passwords with a third party.
Enter Open Finance
Open Finance puts the consumer in control of their data. It means that companies, financial and otherwise, can build and offer solutions that help consumers understand and manage their financial lives better. In addition, it provides a foundation that gives consumers and financial providers better access, visibility, and control into who has access to financial data. Financial providers can gain a better understanding of their customers and needs in order to improve their customer analytics and targeting for marketing programs.
However, the United States is still a long way from a truly open finance ecosystem. Consumers overwhelmingly agree (89%) that they own their financial data and should be able to control who has access to it. While this is the case, more than half of consumers (55%) also agree that they aren’t sure what companies or providers have access to their financial data.
Open finance and open banking regulations are taking hold in the U.S. and Canada, from market-driven to government mandates, but there is still much to be done. As the U.S. Consumer Financial Protection Bureau (CFPB) prepares to formalize rulemaking under Dodd-Frank Act’s Section 1033 this year and with the implementation of consumer-directed finance in Canada underway, understanding and laying the groundwork for consumer data rights and sharing should be top of mind for financial institutions and fintechs.
Why Open Data Access Matters
Open Finance can enable a financial institution to extend its core systems directly to customers and partners to create a more open data sharing environment. With open access to data, financial institutions, fintechs, and their consumers can better understand and do more with financial data. It enables:
- Better Fraud and Risk Management: By leveraging an open finance API rather than screen scraping, consumers never have to share their username and password, and financial providers eliminate the risk of sharing credentials.
- More Accurate Customer Profiles: Financial providers can gain access to real-time financial data from their consumers. They can easily see where consumers are sharing their data and why it is being used. This helps identify product and partnership opportunities
- Enhanced Customer Experiences: Consumers have greater control over their financial data with the ability to connect and share their data on their terms. They can also more easily manage and revoke access to their data at any time. By putting consumers in the driver’s seat, financial providers can build trust and improve relationships, leading to greater customer satisfaction and loyalty.
- Personalized Services: By analyzing their financial data, businesses can identify specific customer needs or preferences and tailor their offerings accordingly. For example, a bank may offer investment opportunities to customers who have a higher disposable income, or provide budgeting tools to those who struggle to manage their finances. By offering more personalized services, businesses can create a stronger connection with their customers, leading to increased loyalty and retention.
- Data-Driven Decision Making: Businesses can gain insight into trends and patterns that may not have been apparent before. This can help businesses identify new opportunities, optimize their operations, and make more informed decisions about product development and marketing strategies.
Introducing MX Data Access
MX is making it easier than ever for financial institutions of all sizes to accelerate open finance adoption and enhance the money experience for consumers through Data Access. The platform enables institutions to deliver a safe and secure connectivity experience for their customers. With consumer authorized and permissioned data sharing, customers gain visibility and control over which apps and institutions access their data — enabling them to grant, manage, and revoke access at any time.
Data Access is an open API platform built on FDX standards that improves time-to-market and reduces costs to deliver secure data sharing, as well as provide the groundwork for greater insights about customer behaviors, trends, and needs. It provides financial institutions with the ability to monitor and manage where consumers are sharing their financial data and the tools to implement a more secure data-sharing experience with token-based connectivity.