Presented by Envestnet | Yodlee
Open banking initiatives are gaining traction in the U.S. Join our webinar to discuss the current status of open banking with industry thought leaders from FinGoal, Tiller Money, and Envestnet | Yodlee, and learn how it’s fueling both opportunity for FIs and better financial outcomes for consumers — and how to prepare.
The open banking movement is gaining momentum in the U.S., and more folks in the industry, especially traditional financial institutions, are starting to pay more attention than ever to the trend — and competitive influences are driving that change, says David Nohe, CEO, FinGoal.
“Legacy players are in a massive season of transition as digital-only banks continue to gobble up market share,” Nohe says. “If they don’t make some change in order to stay competitive, they have an existential crisis on their hands.”
That’s why the largest banks in the world are starting to make significant investments in innovation all up and down their stacks, to improve everything from new account onboarding to the merger of consumer and business banking accounts, which for years were separated, to bringing in all sorts of third-party functionality – which is bolstered by open banking.
Open banking is the practice of sharing consumer financial information via APIs with third-party companies for the development of new apps and services. FIs are getting the message that open banking is happening and it’s in their favor, Nohe explains. It’s good for their business, and will help them be more competitive, because first, they don’t have full market share of any of their customers. Second, even a big bank or a well-funded digital-first bank can’t build all of the functionality that a company with a billion dollars of investment capital behind them can. And third, driving new product value in digital banking and digital financial services requires open sources of data from throughout the ecosystem.
“Consumers are giving their banks and financial service providers access to more and more parts of their life, enabling that FI to serve them better,” Nohe says. As an example, he explains that the pandemic has seen a surge of traditional W-2 income employees starting to supplement with 1099 income — side hustles of all shapes and sizes. With open banking, FIs can identify that change, and offer value to the customer by finding expenses that might be tax deductible; and if that same customer eventually drops their full-time employment and becomes fully self-employed, there are all sorts of other financial services that the FI could provide to them as a small business owner.
“Before, you might market broadly to the world and you hope that your existing retail customers knock on your door once they become small business owners. Today we’re in a world where forward-thinking banks have visibility to that change because they’re looking at the data,” he says. “They can be proactive in outreach to customers.”
To take advantage of the open business movement, business leaders in the financial sector need to start pushing their existing core banking and digital banking software vendors on what they’re doing to enable access to third-party data — and to open up access to their first-party data to third parties, Nohe says.
“All vendors will say they have a strategy and it’s possible, but ask them what it costs,” he adds. “Ask them for a way to speak with another institution on their platform that’s already doing that kind of thing, and see how it works in practice.”
For the same size institution, getting the same types of service, but using different vendors, Nohe has seen enormous differences in cost and complexity. A regional institution might have to pay $20K to $100K a month in extra fees to their vendors just to enable some data sharing, while other vendors, for the very same size institution, might have a $1,500 implementation fee and a couple of hundred dollars to keep it going.
Much of that comes down to how the different vendors have built their businesses and their tech ecosystems to enable this kind of sharing. If it’s expensive, that’s a sign that it’s overly complex and difficult to implement. If it’s not expensive, that’s a good sign — but ask for references so you can make sure this is real, he adds.
For more on the current state of open banking in the U.S., an in-depth look at how an open banking ecosystem functions, and how open banking can transform your relationship with your customers, don’t miss this VB Live event.
Don’t miss out!
Attendees will learn:
- What’s happening with open banking in the U.S.
- How open banking ecosystems work
- Ways open APIs drive financial wellness
- How to leverage deep consumer insights
- How to prepare for open banking
- David Nohe, CEO, FinGoal
- Peter Polson, Founder, Tiller Money
- Brian Costello, VP, Data Strategy and Strategic Initiatives, Envestnet | Yodlee
- Evan Schuman, Moderator