The promise of open finance — the ability to access and act on financial data — provides an incredible opportunity for both consumers and businesses.
We live in an era when consumers expect effortless digital experiences across all their applications and devices, and open finance can help financial institutions deliver on those expectations.
For financial institutions and fintechs, greater access to financial data enables them to innovate and create more personalized products and services to meet unique customer needs and expectations. For their customers, permission-based data sharing through open finance provides more control over their financial data, enabling them to choose who has access to this personal information.
In this new ecosystem, financial data belongs to the customer, not the companies with which that customer does business. The message to the consumer is one of empowerment.
A Hard Pill to Swallow:
Every financial institution wants to protect customer data, but consumers need — and deserve — access to their own financial data.
Creating a Single View of the Customer
The ability to bring together financial accounts into a single view enables consumers to better understand their finances and make smarter financial decisions. Assembling a complete picture of consumer finances also allows financial institutions and fintechs to uncover new revenue streams and analyze consumer behaviors to deliver better experiences.
However, the reality is most consumers are not yet taking advantage of the value a single view of their finances can deliver. A recent survey conducted by MX on trends in digital banking found that 50% of respondents say they have not used digital tools to bring different financial accounts into one view, such as a mobile app or online account.
When consumers are asked why they don’t aggregate their accounts into a comprehensive view, the challenges and opportunities come into sharper focus. Consumers either don’t yet see the value of account aggregation, or they don’t know how to create that single view. Consider these findings:
- 28% say they don’t know how to connect their accounts in one place
- 27% say they don’t care about seeing all their accounts in one place
- 11% are concerned about sharing their user name and password with a third party
- 10% cite concerns about sharing their financial information with a third party
- 7% say their financial services provider has not offered the option to connect accounts
These objections translate into opportunity and underscore the need for financial institutions and fintechs to educate consumers on the value of open finance. The advantages are myriad, and it is up to financial institutions and fintechs to help their customers see how they can benefit from having a consolidated view of their finances.
Keep in Mind:
Your customers may not understand the benefits of open finance yet. But it's part of the experience they're craving.
Why Should Banks Institute Open Finance?
Ultimately, financial institutions must drive home the ways in which having a comprehensive view into their finances offers customers greater functionality. Among the benefits to communicate about open finance are that it:
Enables better customer experiences
Open finance gives companies greater access to consumer financial data, enabling them to innovate and create more personalized products and services to meet customer needs. This 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.
Supports financial inclusion
With the unique access that open finance gives into consumers’ financial lives, financial institutions can create tailored products and services built FOR underbanked groups by someone who understands them. It also enables greater insights beyond a credit score to make decisions on loans, mortgages and credit cards — ensuring those who are unbanked or underbanked can access financial services when they may otherwise have been denied.
Helps mitigate fraud and risk
Greater insights into consumers’ financial lives also mean it’s easier to spot anomalies and potential fraud, reducing risk for both the organization and customer.
Drives smarter financial decisions
Better visibility into their financial data allows consumers to make more informed financial decisions, while enabling financial providers to make better lending decisions. As a result, open finance is significantly positive for the economy in the form of healthier lending, decreased default rates and smarter financial decisions.
How Open Finance Resonates Across Different Demographics
While many customers have yet to connect different accounts into a consolidated view of their financial picture, 44% of respondents have already done so. Not surprisingly, younger “digital native” customers are further ahead.
Among Millennials (those born from 1981 to 1996), 59% of customers have used account aggregation tools. Among Gen Z (born from 1997 to 2012), the figure already stands at 60% and it can be expected to increase as the children who make up a large swath of Gen Z grow up and begin managing their own money.
The data also show that minority groups are ahead of the curve. Customers who have already brought their accounts together into one view include:
- 62% of American Indian or Alaskan Native respondents
- 61% of Hispanic, Latino or Spanish-speaking respondents
- 63% of Asian or Pacific Islander respondents
- 56% of Black respondents
- 40% of White respondents
While those who have connected accounts total only 44% today, the survey found that more than half of respondents agree that being able to see all accounts in one place is important. Financial institutions and fintechs have a tremendous opportunity to pave the road to open finance by enabling seamless connectivity and data sharing between financial accounts.
MX powers the open finance economy by unlocking the value of financial data with the most secure and reliable financial APIs. MX is enabling trusted access to financial data and making it actionable for intelligent decisions and personalized money experiences.