What is Open Banking?
An unthinkable concept only a few years ago, “open banking” is now becoming a reality and revolutionizing the financial services industry in the United Kingdom. This initiative is also and garnering serious consideration in the United States. Under this new set of regulations in the United Kingdom, consumers will have more control over their financial data. This proposal includes new rules that would allow consumers to more easily access their account information to find solutions that best suit their financial needs.
This right ensures consumers can continue to give permission to third party companies to use their data to assist them in managing personal finances, obtaining loans, making payments and providing investment advice among many other innovative applications and services to improve their financial well-being.
How Can Open Banking Be Used and Why Does it Matter?
Open Banking encourages innovation and a new range of products that make it easier for consumers to budget, obtain credit, plan for the future, and more. With the secure and clean data in hand, the possibilities for innovation are unlimited – for innovators, financial institutions and consumers alike. Open banking would also engage smaller financial institutions and fintech startups to better compete on cost of service and quality of customer experience.
One notable group promoting this concept in the United States is the Consumer Financial Data Rights Group (CFDR), which is supporting consumers and small businesses by defending their right to access and share their own financial data. This right ensures a consumer can continue to access and provide permission to third party companies to use that individual’’s data for enabling innovative products and services, including managing their personal finances, obtaining loans, making payments and providing investment advice in addition to many other applications.
As it currently stands, most APIs created by third-party developers are private, rather than public. This means tight security restrictions are in place to ensure that only the organization itself can use it. On the other hand, public APIs allow outside parties to build innovative apps based on a financial institution’s data. This data can then be used to develop easier ways to pay online, offer budgeting tips, allow for quicker payments and many more services previously unavailable to everyday consumers.
More About the Open Banking Standard
Although the primary focus for open banking and open APIs is Europe’s PSD2 and its 2018 implementation deadline, banking authorities in the United Kingdom have been supporting the principle as well through the Open Banking Initiative. PSD2 is intended “to protect consumers better when they make payments, promote the development and use of innovative online and mobile payments, and make European payments services safer.”
Open Banking and Envestnet | Yodlee
Envestnet | Yodlee is a proponent of open banking across the globe. We believe consumers should have open and unfettered access to their transactional and other financial data, and, as a founding member of the CFDR in the US, and Fdata in the UK, we believe the industry has a responsibility to provide this access. As we continue to build direct partnerships with some of the largest financial institutions in the world, Envestnet | Yodlee is working to make financial data accessible and open to consumers everywhere.
The Envestnet | Yodlee Financial Data Platform API is an open and custom solution allowing customer-permissioned connections with relevant internal bank systems, providing financial data safely, securely and in a highly compliant manner. These APIs safely expose internal data structures in a way that allows third-party developers to quickly innovate within a secure financial institution (FI) environment. The API also provides additional tools, such as sample code, custom portal, API library and community assets that accelerate the development cycle.
With years of experience and trusted partnerships with banks, brokerages,nonbank lenders and more on our side, Envestnet | Yodlee taps into user-permissioned financial data from 16,000 sources, 70 percent of which comes from direct structured feeds from some of the leading FIs in the world.
Using our APIs, financial institutions can not only develop apps and functionality, but they can leverage the open source banking data analytics. Envestnet | Yodlee tailors each tool to the FI’s unique environment.
Envestnet | Yodlee’s Financial Data Platform API is exactly what the financial industry has been looking for. With speed to market, regulatory compliance and security, we enable innovation for banks, financial institutions, and non-banking innovators to deliver more competitive services for consumers.