Staking out banks' place in the open financial web
Brett Pitts is on a quest that will likely take years to pull off, and may go largely unheralded by most consumers. But make no mistake: His pursuit to help customers use third-party apps could change banking in the U.S.
Pitts, who serves as head of digital for Wells Fargo virtual channels, and his team have spent the last few years working with fintech companies, data aggregators and regulators on ways they could unite to let customers share financial data with the app of their choosing without disclosing their bank credentials. Last year, those conversations gave way to partnerships for the San Francisco bank.
Wells Fargo made an industry splash in announcing last June an application programming interface with Xero, a partnership that lets small businesses port their bank data directly into the accounting software — without sharing their credentials. Since then, the bank has announced similar partnerships with Intuit, the owner of Mint and Quickbooks, and Finicity, a data aggregator that supplies financial data to apps ranging from online lending to money management.
Those deals have set the stage for a profound change in banking. Such data-sharing partnerships, after all, require banks to rethink the way they guard assets and their customers’ data. Sure, the bank may get money from their partners, but the arrangement requires them to iron out liability details, give customer intel to companies many within the industry still consider competitors and produce an experience consumers will likely fail to notice. That leap of faith is expected to help drive and support digital banking advancements, and ultimately, an open financial web. Such deals are putting Wells Fargo at the forefront of innovation and are among the reasons Pitts is one of our Digital Banker of the Year finalists.
“This is the future,” Pitts said.
As Pitts sees it, there’s a need to move to a model that eliminates sharing bank credentials with outside companies not only because it ups the odds of a hacker compromising an account but because it delivers an experience bound to break down for consumers.
“We believe there are better ways for banks and fintech companies to share their common customers’ data,” Pitts said. “At a minimum, customers should have the ability to choose what data they wish to share, and the process shouldn’t involve their login credentials.”
That belief is why Pitts plans to help Wells make more API partnerships and also why he hopes other banks do the same. Several already have. Capital One, Silicon Valley Bank and City National Bank all have inked similar deals with Xero, for instance.
Steven Smith, chairman and CEO of Finicity, says Wells Fargo deserves recognition for something that had only been a topic of discussion in the U.S. until the San Francisco bank inked a deal with an aggregator, his company.
Also by partnering with Finicity, Wells is supporting an open financial web that is more inclusive and not just targeting the most popular fintech apps.
“It was the first big step,” Smith said
U.S. banks have been behind other areas of the world in regards to APIs, said Kristin Moyer, a research vice president and distinguished analyst in Gartner's banking and investment services practice. So, the moves Wells has made are encouraging for something she said she believes is inevitable: moving away from a screen-scraping model, the practice of sharing credentials, and into an API-driven one.
“Over time, APIs will become the more predominant way of sharing data,” Moyer said.
The API model has its critics. Some see it as the bank’s selfish attempt to continue to call the shots on customers’ data. Screen scraping, after all, provides a money-related app with all the financial data, while the API model risks banks cherry-picking what data fintech firms can grab.
Pitts is adamant that Wells Fargo is not interested in “throttling the data that people want to share.” Rather, he says, the bank wants to help enable customers to use other apps in a safer way.
Not only does Pitts hope the new data-sharing model will improve the customer experience but that it will also drive engagement on the bank’s digital assets.
Already, Wells’ research shows many of its active digital users are also using third-party digital financial tools. It could also attract new customers: Pitts said the Xero partnership has led to net new customers even though the bank’s data-sharing API strategy wasn’t intended to be for business growth.
Although the bank has put a lot of resources into making it easier and safer to connect with third parties, Wells also continues to be hard at work at modernizing its own digital properties, including launching a stand-alone app that is meant to inspire savings in addition to testing predictive banking features that the bank plans to roll out to mobile customers this summer.
All such enhancements are evidence of something talked about only as a concept for some time: using the treasure trove of financial data to offer customers more customized experiences — on a bank site or off of it. Now, the concept is moving from runway to real life.
"It feels like many moments have arrived,” Pitts said.