In the last decade, customer loyalty has extended beyond the bank to include an array of non-bank solutions for financial management, payment and lending.
This shift has created demand for an ecosystem where financial data aggregators play the role of a data hub between banks and financial solution providers, enabling the open financial web. Financial management apps like YNAB, Level Money, Mvelopes and MoneyDesktop (MX) do a better job at helping customers manage their money than traditional bank portals, while payment apps like Venmo, PayPal and Google Wallet make certain payment use cases easier than traditional, bank-offered solutions.
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Consumers want innovation, but banks may have a difficult time meeting those needs as quickly as they’re demanded, due to a heavily regulated environment. The services that financial apps bring to the table fill that gap, and now it’s up to banks to adopt more progressive data API strategies.
In order to kick off the era of an open financial web, banks, aggregators and financial application providers are working together to establish industry standards that positively affect all their customers. Today, there are two options: OFX 2.2 and DDA. Both leverage tokenized authentication services and a standard API to improve account security and increase the quality of data delivery.
OFX, standing for Open Financial Exchange, has the deeper history. Developed in 1997, the OFX Consortium created the first financial data ecosystem to enable account holders to use aggregated data with Intuit's Quicken and Microsoft Money. In March of this year, the spec got an upgrade to OFX 2.2, enabling tokenized access to users’ bank data. In October 2015, DDA, or the Durable Data API, was released by the
In the open financial economy, banks that provide their customers the best banking products and services, and access to a wide array of financial technology solutions through data hubs, will win the hearts of their customers. Those that embrace the change, while maintaining a competitive core of lending, payment and account management solutions, will be the next generation winners in the open financial web.
Nick Thomas is president and co-founder of Finicity.