Money struggles have been linked to everything from divorce to higher rates of depression and anxiety to migraines, high blood pressure and heart attacks — not to mention homelessness, suicide and hunger. According to a Capital One Creditwise survey, 73% of Americans rank their finances as the No. 1 stress in life, ahead of politics, work and family.
Even talking about the stress of money is something most of us bury deep down. In fact, a survey from LendingClub found that while 68% of people believe that their financial situation isn’t unique, only 20% to 30% are willing to actually talk about it with someone. Instead, we let the anxiety of money negatively impact our relationships and our health.
An Ongoing Struggle:
Nearly three-quarters of U.S. consumers say finances are their primary source of stress.
Everyone has unique financial challenges and broad solutions don’t always meet the individual needs of consumers. What if the financial industry worked together to enable consumers to choose the financial services that best meet their individual needs — both inside and outside of the bank?
Open finance is the answer. And megatrends in the technology, regulatory and competitive landscape — as well as heightened consumer expectations for seamless digital experiences — are driving the need for it.
An Environment Ready for Innovation
The financial industry is changing at an unprecedented pace and is showing more opportunities for innovation than ever before. But, the challenge in front of us is that we have a closed and complicated ecosystem.
Both the 2022 White House Executive Order on crypto data assets and the 2021 Executive Order pressing the Consumer Financial Protection Bureau to finalize rulemaking on Section 1033 of the Dodd-Frank Act call for an open financial system that better supports innovation, secure data sharing and access to affordable financial services.
The rise of alternative financial providers — including digital-first challenger banks — have also exposed the limitations of legacy systems. Today’s financial ecosystem just doesn’t support secure and reliable data sharing — data sharing that is required to meet customer demand and fuel innovation. Here are just a few examples of how these legacy systems impact everyone:
- Consumers can’t connect their accounts, so they can’t benefit from the innovation and powerful digital solutions that will help them manage their finances.
- Financial institutions can’t access and act on data internally. Or when customers and members try to connect to their accounts, and it fails, they blame their bank or credit union for the bad experience.
- Fintechs are left with less secure and reliable options to power their solutions.
Financial institutions and fintechs who embrace open finance will be better positioned to deliver personalized better consumer experiences, tap into new business models and discover new sources of revenue.
How Open Finance Differs from Open Banking
Open finance is the next step beyond open banking, enabling access and sharing of consumer data to even more financial products and services — not just banking. This includes loans, consumer credit, investments and pensions. It also enables wider integration of financial data with non-financial industries, such as healthcare and government.
If we truly want to create an open financial ecosystem, we need to enable the entire financial footprint of consumers.
And consumers want a more unified and complete picture of their finances. In fact, 90% of people said it would be valuable to see their finances in one place; however, only 40% said they could currently do it, according to an industry survey.
Customer Experience Mismatch:
Nine out of ten people would like to consolidate their finances in one place, but just under half say they can do that now.
The Benefits of an Open Finance Solution
Open finance is the great amplifier to help empower the world to be financially strong — and lessen that financial stress we talked about earlier. Open finance enables this by effectively putting financial data in the hands of consumers and enabling them to choose the financial services that best meet their individual needs — both inside and outside of the bank or credit union.
Open finance 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. For instance:
- Banks and credit unions can collaborate with various providers to deliver a wider variety of services based on consumer data.
- Non-financial institutions and fintechs can gain a broader and more accurate basis upon which to create consumer-centered financial technologies outside of a bank.
- Consumers can choose the data they share, decide how they engage with their finances, and gain unparalleled access to products and services they may not have otherwise had access to — resulting in greater control over their financial future.
Open finance is about extracting more value from consumer financial data so that banks and credit unions can create exceptional customer and member experiences, discover new business models, make smarter decisions, mitigate fraud and risk, and support financial wellness.
It’s time for both financial institutions and fintechs to focus on how they can adopt methods and practices that will drive innovation internally, and create loyalty externally with consumers. Consumers want to know who is going to help them solve a problem. That way financial institutions are not competing on just the price of their service, but also on who can solve the most problems and drive positive outcomes for the consumer. With open finance, you can unlock the power of financial data to meet those needs and change lives.
MX powers the open finance economy by unlocking the value of financial data with secure and reliable financial APIs. MX is enabling trusted access to financial data and making it actionable for intelligent decisions and personalized money experiences. Our ecosystem connects more than 13,000 financial institutions and fintechs.