What is open banking and why is it being adopted by leading financial institutions worldwide, including the United States?
At its core, open banking is about a consumer’s right to provide their financial data to their third party financial service providers. This data sharing not only supports the consumer’s ability to better manage their financial wellbeing, but also drives expansive innovation within the financial industry for consumers and business, as well as new and incumbent financial institutions, lenders, advisors and technology companies.
How is Open Banking being defined in the United States?
While open banking is well underway in Europe thanks to regulations like PSD2, it’s a developing ecosystem in the United States. Policy makers, regulators, and the industry are working to craft the overarching regulatory framework and technical standards. Envestnet | Yodlee is proud to be involved in these seminal efforts, including:
• The Financial Data Exchange (FDX) is an industry consortium whose members are dedicated to jointly evolving the Durable Data and OFX API standards to improve connectivity, transparency, and security when sharing consumer financial information.
• The North American chapter of the Financial Data and Technology Association (FDATA NA), a group which seeks to educate and advocate for consumers’ rights to access and use their data via the providers of their choice.
Why Open Banking? Why Now?
As mainstream consumers become more reliant on technology and expect everything to be instant, hyper-personalized, and mobile, the financial world is responding. While mobile banking isn’t new and there’s a substantial number of FinTech providers competing and collaborating with traditional institutions, it’s become clear that the consumer financial data ecosystem must evolve to service the market.
As these opportunities become more prevalent for consumers, reliable consistent access to financial data becomes a critical requirement, yet absent a regulatory mandate, institutions are generally reluctant to facilitate this access due to security, financial or competitive concerns.
But open banking changes that, providing connectivity via well-managed and reliable interfaces that address the inherent risks of traditional data sharing via the customer-facing interface.
Why Envestnet | Yodlee Clients are Ready for Open Banking
• API-Based Access
Our clients are ready to make their consumers’ financial data available via standardized APIs. That’s because our API and data access agreements are designed to benefit all parties, setting clear controls over what data is being leveraged, the technologies used and timing for eliminating screen scraping.
• Secure Authentication
Our clients are ready for consumers to be securely authenticated through OAuth — and eliminate the need for them to share their login credentials with third parties. This is possible because we only get data based on the app or the use case requesting the data, and don’t share data across applications.
• Transparency and Control
Our clients’ users are ready to view and control how their data is being accessed and used. Likewise, our clients are prepared to see to whom customers are sharing their data. That’s because we store and manage a separate permissioned version of financial data for each consumer on each application, only refreshing this data on behalf of a user to support the contractually agreed upon use case.
Envestnet | Yodlee is Ready When You Are
Envestnet | Yodlee is ready to be your Open Banking partner. We have the architecture and business practices already in place, we support OAuth in Open Banking compliant workflows, and not only adhere to, but often exceed leading banking industry practices for data security, regulatory compliance and privacy. We’re a FinTech pioneer and Open Banking leader with a reputation for friendly and compliant data access solutions.