Brett Alread is the Product Manager at MX.
Do you remember your first CD? For me, it was copper throw, the third album by Live. It was the first of many. At that time, CD players became the norm, and my CD file became a treasure for teens.
A few years later, Sony released the first portable MP3 player. It was a game changer. But the music industry will not allow you to transmit music. Music compression and bandwidth increase technology made music sharing possible but this was not penalized. Basically, it was a closed ecosystem.
In 1999, Napster introduced a way to rip CDs and transfer music over the Internet. For years, the music industry fought this, but consumers continued to do so because it was the easiest way to get digital music.
In the end, the music industry realized that it was best to join the digital music revolution. The peak moment in digital music history was when the Beatles finally acquiesced and allowed their music to be sold on iTunes.
There are a lot of similarities between the music industry then and the finance industry today. Your financial data is a lot like an old CD library. Each of your accounts is located in a separate location, and while there are options to group them together in one view, they are tricky, inconsistent, and not supported or authorized by financial account providers.
We live in a closed financial system where sharing data means scraping websites, which is the equivalent of ripping CDs. We are in the Napster era of sharing financial data.
It’s time to evolve as an industry! Just as the music industry developed and was eventually able to benefit from music sharing, account providers need to evolve and take advantage of user-allowed data sharing. It’s what we call open financing – the ability for users to access their financial data and enable sanctionable engagement with the fintech applications they want to use. This will usher in a new era of personal financial experimentation, incredible innovation, and massive industrial collaboration to help automate financial management.
Here are four reasons why every financial account provider should embrace user-enabled data sharing and open funding:
1. Reduce fraud and security risks
The common method of digitally accessing financial data requires users to share their online banking username and password with a third party that scrapes the online banking site to get the data. Most consumers don’t realize that they’re handing out their credentials to someone in addition to the bank, yet they still expect their accounts to be protected and secure. Open Funding APIs eliminate the risks associated with screen scraping and credential sharing.
2. Gain real-time insights and actionable data
When financial data is shared versus scraped, financial account providers can gain real-time insight into what is happening in the financial ecosystem – where the data is being transferred, with whom it is being shared and how it is being used. This leads to a better understanding of customer needs and the detection of new use cases and solutions.
3. Reduce infrastructure costs
More scrape means more servers hitting traffic. Based on my experience, I believe that up to 60% of internet banking traffic comes from scraping and not from actual users. By utilizing the best practices of open finance, you can significantly reduce this burden and get more accurate web analytics than online banking. Open finance APIs are more efficient and cost effective.
4. Increase customer satisfaction
As more financial data is shared, companies can gain better insight and deeper insights into their customers’ behaviors and needs. This allows them to create better, more personalized experiences and increase levels of customer satisfaction and loyalty. In addition, Open Finance provides the ability for clients to seamlessly connect to their favorite fintech applications to manage their money. our research It shows that 72% of consumers would consider switching their bank or credit union if it could not connect to frequently used fintech applications.
To get started on your path to unlocking financing, here are some of the first steps you can take:
• For financial service providersRealize that your data may already be scraped by other providers and third parties – and take steps to make this data-sharing experience more secure and frictionless for consumers. Explore how your organization obtains, uses, and shares data today, and build your way forward to enable secure and seamless data sharing tomorrow. This could mean building new capabilities internally or finding a data partner to support your open funding journey.
• for consumers: Look at your financial accounts and take advantage of the option to link other accounts in one app or view. This will help give you a more complete picture of your money in one place, making it easier for you to manage it and work towards your financial goals.
minimum? It’s time for the financial industry to evolve and embrace financial data sharing. Let’s give the consumer what they want: more choice, more freedom and more innovation.