The global COVID-19 pandemic has shone a floodlight on financial vulnerabilities and the stress they cause for families. A recent survey shows that only 22% of Americans give themselves high scores on their own financial wellness. This is a failing grade for the financial services industry and a call to action: Providers must begin competing on customer outcomes.
Enter open finance, which is premised on a simple idea: making financial data accessible to everyone. In practice, open finance describes networks of secure connections, primarily application programming interfaces (APIs), that allow customer-permissioned data and services to flow between banks and third-party providers. People benefit from access, portability and optionality and the industry benefits, too.
Financial institutions that partner with fintechs and other third parties can access data and services across different verticals, which adds more value to customers. Fintechs and other nonbanks gain more secure and reliable access to consumer financial data. Both sides can leverage the capabilities of the other.