The day was packed with panels, fireside chats and of course Benzinga’s Global Fintech Awards, powered by Envestnet® | Yodlee®. For the second consecutive year, Envestnet | Yodlee and Benzinga joined forces to celebrate the companies and people achieving great things in the FinTech ecosystem. One of the panels was a candid dialogue about open banking. I moderated the discussion between Brian Costello, VP of Data Strategy and Strategic Solutions with Envestnet | Yodlee, and David Nohe, CEO of Fingoal, as they take on one of the industry’s most recent “buzziest” buzz words.
For the uninitiated, open banking, also referred to as open finance, is an important topic in the FinTech community. Open banking is the practice of banking institutions releasing a consumer’s financial data, with their permission, directly to third parties financial applications and experiences, primarily via APIs. The resulting benefit is more comprehensive experience for the consumer. This open banking connection will allow for companies, like FinGoal, to draw even more accurate conclusions from the data they implement into their consumer experience. It’s essentially FinTech equivalent of, “If you knew better, you’d do better”. Financial Institutions can use the data to tailor better financial products, consultants can use it to give more accurate advice based on a more complete financial picture, and consumers themselves can even make use of the data to aid in better financial wellness decisions.
Benefits of Open Banking
As strong supporters, both Brian and David also agree that the ultimate feature open banking offers, the consumers, developers, and even Banks, is freedom of choice. The freedom for the consumer to choose how to best utilize their data. The freedom to get the best financial personalize services available with the use of that data. The ability to create the most specific and successful financial offerings. Brian mentioned the consumer’s ability to not only have all of their information in one place, like a PFM (Personal Financial Management) offers, but the ability to have that data in one place, and then have it expertly analyzed. David seconds this idea, from a developer’s point of view, explaining how their ideas are inextricably related to the quality of data they get. If the data gets better, the developers will be able to create products to meet actual needs instead of presumed ones.
With regards to detractors, both did acknowledge the security risks. David answering that it would need to fall on the industry itself, and companies like Envestnet | Yodlee, to a do thorough job vetting these third parties. Tucked into his answer was advice for founders to study the privacy laws and regulations as it would apply to their company and their products so they will be prepared for the heightened review process. Brian concluded many of the same risks are involved with the current practice of screen scraping as well. As to the loss of personal relationships or the negative effect these changes might have on the current banking model, David says that most institutions fall into two categories: the ones who fear the change and the ones that recognize the opportunities that come with the change. Brian explains that by not only allowing their data to be used, by fulling embracing the capabilities of open banking these companies with be able to evolve, instead of lose, the personal relationships they have built with their customers.
Navigating Uncertain Times
As always in these times COVID-19 broached the conversation, the struggles that it brings but also the opportunities for growth. David highlighted the shifting focus from bank and credit unit branches to the digital aspects of their businesses. Spending money to really innovate and advance that area of their business because of both the time they have available and the need for contactless interaction that COVID-19 has inserted into the market. After bringing attention to the cost of the digital sectors growth, Brian related an anecdote on the banking industry’s commitment to innovation. He explains how he and his wife were taking the isolation very serious at the onset of the lockdown and they were not leaving the house for any reason. His wife, however, had a check that was above her bank’s remote deposit capture limit. The bank made various offers in which they could safely meet in person but Brian and his wife were not going to leave the house. What the bank did next is hard to believe. They asked Brian’s wife, who happens to be a financial executive involved with products herself, to take a call with their product team. They had five different people on the line attempting to deliver great customer service and innovate their product to match the changing environment. That is the way the FinTech industry needs to treat this pandemic, an opportunity to work in ways that we have not had the time or focus before.
The companies that seek out and make the most of these present times will be recognizable by the success they have over the next year and beyond.
What part Open Banking will play in these new developments is difficult to say. The panel showed a clear support for it from both a senior executive in an established aggregator, in Brian Costello, and the CEO of a FinTech developer, in David Nohe. While the topic is still very much up for debate in the oft slow-moving regulatory Banking world, the potential it offers and the traction it’s gaining around the world seems to suggest it is only a matter of time before open banking moves from “buzz word” to common practice.
Recognizing FinTech Leaders
Lastly, we would like to recognize and congratulate all the companies and executives that won Benzinga Global Fintech awards this year (a list of whom can be found here) and while discussing open banking, I wanted to acknowledge a few winners from Australia’s 5th Annual Global FinTech Awards. A special congratulations specifically to Frollo, winner of the Best Open Banking Platform and 86 400, who we awarded the Best Smart-Bank/Neo-Bank category winner. After which, 86 400’s Chief Product and Marketing Officer, Travis Tyler commented, “It is great to be recognized as a leader in the new wave of banking, being one of the first banks to help customers truly take control of their money and see it all in one place. We look forward to continuing to provide a smarter alternative to banking and helping customers get more out of their money.” All of the winners achieved and added much to our industry and our shared goals, the progress made by them and others like them are the reason our industry continually outgrows projections and further ingratiates itself into the fabric of ancient banking institutions and the lives of every day consumers.