The future of finance is open. Open Finances puts consumers in control of how they share and act on their financial data. And, it means financial services providers and other companies can build and offer solutions that help consumers understand and manage their financial lives better.
We see 5 critical stages along the journey to Open Finance for financial institutions and fintechs alike:
- Build: Modernizing infrastructure and APIs to enable data access and seamless connectivity.
- Advance: Prioritizing secure data access and data sharing with open finance APIs.
- Drive: Leveraging consumer-permissioned financial data to drive new innovation, revenue streams, and decision making.
- Lead: Building personalized, automated experiences and exploring embedded finance products and services.
- Innovate: Fully embracing Open Finance and innovating the way forward to more beneficial ecosystems.
STAGE 1: BUILD
Organizations in the Build stage know that modernizing their infrastructure and APIs is critical to enabling data access and seamless connectivity. They are building the foundation to better enable their business to meet consumer needs and make sure they don’t lag behind others in the marketplace.
Characteristics:
- Actively working to solve gaps in technology infrastructure that will hinder growth, compliance, and innovation.
- Committed to leveraging APIs and opening up infrastructure to drive innovation and partnership.
- Lack tools or resources needed to effectively access, monitor, or utilize consumer-permissioned financial data.
- Working to eliminate or minimize screen scraping within the organization, as well as mitigate other risks.
- Don’t have reliable connections to enable customers to easily share and control data with third parties.
- Inconsistent connectivity performance monitoring and reporting mechanisms.
- Little to no visibility into when consumers want or need additional products or services.
STAGE 2: ADVANCE
Those in the Advance stage are actively focused on enabling secure and reliable data sharing through open finance and open banking APIs. They seek to reduce consumer friction and increase connectivity wherever possible.
Characteristics:
- Uses open finance APIs to reduce risk, as well as power seamless, secure data sharing for consumers.
- Leverages credential-free, tokenized API connections to securely access account data and verify accounts as both a data provider and recipient.
- Recognizes consumers own their financial data and leverages consumer-based permissions for data sharing.
- Actively monitors and manages where customers are sharing their financial data.
- Closely evaluating new regulatory requirements and making plans to ensure any new compliance obligations are met.
- Has consistent consent management and authentication flows to ensure appropriate authorizations and reporting.
STAGE 3: DRIVE
Companies in the Drive stage have the infrastructure and APIs to access and act on consumer-permissioned financial data. They have the mechanisms in place to analyze data to identify opportunities for new innovation, revenue streams, and decision making.
Characteristics:
- Actively leverages data cleansing and enhancement to translate raw data into actionable intelligence for consumers and the business.
- Has a clear understanding of all data traffic in and out of the organization so that they can better monitor and manage consumer-permissioned data.
- Invests in business intelligence and analytics tools to help them understand consumer preferences and behaviors.
- Actively analyzes product performance to identify upsell and cross-sell opportunities.
- Makes data easily accessible and actionable across all departments in the organization.
- Makes data-driven decisions to mitigate risk, increase consumer retention, and deepen relationships.
- Has the ability to see a 360-view of consumers but is not yet acting on the data.
STAGE 4: LEAD
Leaders dedicate significant resources to enriching consumer experiences. They strive to build personalized, automated experiences and create embedded financial solutions to meet consumer needs. They anticipate consumer needs through machine learning and use data to improve financial wellness. They are pioneers in the market and lead by serving on forums and panels to set industry standards.
Characteristics:
- Puts the consumer experience at the center of their business strategies.
- Uses AI and machine learning to deliver personalized, automated experiences.
- Leverages APIs to enable or create embedded financial products and services to meet unique consumer needs.
- Uses consumer segmentation to provide relevant offers and messaging.
- Recognizes that reducing friction points within the consumer experience is key to consumer engagement, retention, and acquisition.
- Takes an active role in helping to shape potential rulemaking related to consumer data rights and Open Finance with industry associations and relevant government agencies and congressional representatives.
STAGE 5: INNOVATE
Companies in the Innovate stage have fully embraced Open Finance. They have a customer-first company strategy and are relentless in their pursuit of the best consumer experiences. They partner with vendors and third parties to build beneficial ecosystems. They constantly look for ways to optimize costs, improve consumer retention, and drive innovation for both themselves and the industry at large.
Characteristics:
- Constantly seeks to add new connections with third parties to increase data accessibility.
- Creates clear priorities that support a customer-first company strategy across all departments of the organization.
- Supports a culture that enables teams to quickly iterate and ideate to deliver new innovation at speed and scale.
- Partners with other fintech companies and third parties to deliver better value to consumers and reduce costs.
- Proactively looks at data, including where it’s being shared and used for, to identify product gaps and potential partnerships.
- Builds beneficial ecosystems to optimize costs, improve consumer retention, and drive innovation.
- Prioritizes use cases based on consumer-permissioned data that drive additional value for consumers, and understands the need to leverage data responsibly and ethically.
Understanding the Journey Stages of Open Finance
