Improving Open Finance With Secure Data Access

Connecting consumers to their data, no credential sharing required

People expect to access information from their primary banking accounts through fintech apps, payment services, and other third parties. However, sharing banking information has historically required that consumers provide their usernames and passwords with the third party accessing their data – a situation that is less than ideal for all involved. 

Authenticating their financial institution accounts with a trusted third-party provider shouldn't require consumers to share their private username and password. That's why Fiserv and MX, a financial data platform provider, are working together to enhance connectivity and secure data sharing, using tokenized consumer data so credentials are never shared.

It starts with a secure portal provided by AllData® Connect from Fiserv, through which consumers can agree to share their financial data with specified third parties. Once a consumer is authenticated, an identifying token is issued in place of the consumer's username and password. That token enables the third party to securely access the consumer's data based on the consumer's permissions.

MX is the first company to access data through AllData Connect. We spoke with Jamie DelMedico, vice president and general manager of aggregation and information solutions for Fiserv, and Don Parker, executive vice president of partnerships for MX, about data sharing and the need to adapt to changing consumer expectations in open financial ecosystems.

People are using multiple nontraditional players to manage their finances. What's the effect on data security and access for financial institutions?

DelMedico: There's been a massive shift to digital in the past few years. Fintechs are offering more embedded financial capabilities, and financial institutions are adopting third-party technology to enhance their experiences. Consumers want to engage with different players in the digital space, from fintech startups and digital banks to their own financial institution. Data sharing – including permissioned data access – is central to that.

Parker: People want to know where their data is being shared and how it's being shared. The right to consent – and even the right to be forgotten – will significantly impact our industry in the very near future.

Today, there is a convergence of high consumer expectations for superior financial experiences and meeting the demands of a heightened regulatory environment. In many ways, financial institutions have become data providers, which begs the question: what should be the role of a financial institution in securing data and monitoring where that data is going?  

Currently, financial institutions don't necessarily have oversight or visibility into all of the areas where data is flowing. Is it the financial institution's responsibility to manage where and when data is being accessed, who's accessing it, and what it's being accessed for? Those are questions regulators are trying to understand as data sharing practices are established.

DelMedico: Many financial institutions will find it difficult to operate in this regulatory environment if they don't create the infrastructure to facilitate it.

How are open finance and data sharing connected?

DelMedico: Open finance is a way for organizations to offer their consumers the experiences they want – securely and in line with regulatory expectations. The reality is banks and credit unions can't possibly offer every niche experience consumers and businesses want. It's just not possible. And these experiences can't happen if there is no data to inform them, so open finance and data sharing are inextricably linked.

Parker: Open finance is about more than providing consumers access to financial data. It is about extracting more value from the data and having the technology and tools to deliver better customer experiences, discover new business models, reduce risk, prevent fraud and support financial wellness.

DelMedico: Open finance means every financial institution can launch their own data sharing API quickly, efficiently, and at a fraction of the cost and strain of traditional methods. And it allows consumers to take advantage of tokenized, secure capabilities so their credentials never have to leave the financial institution. Tokenization is the foundation that enables financial institutions to securely provide data to third parties at the request of their customers.

As you start to open up finance and make more data available, you can't slow down the process. You have to ensure there's operational efficiency – that data moves in real time while also reducing cost and risk.

How do data sharing and open finance enhance the consumer experience?

Parker: Digital natives are used to having a device in their hands and being able to easily access the information they need. They will share their data if they know they're going to get something of value in return – an offer, update or something that makes their lives easier or better.

And it's not just Gen Z. People of all ages are using data to create financial experiences that complement their lifestyles, vision, and passions, and provide that value in exchange. They get to dictate where, when, and how they engage.

DelMedico: We're seeing specific use cases where data brings incredible benefits. Gig workers, for example, have to balance how and when they're getting paid, tax implications, finding work, and more. So, there's this booming workforce that would have a really hard time managing their financial lives without data access and the ability to share data with financial services companies and fintechs.

In the same way, many people are using low-fee investment management services, and that requires access to financial information.

Is there additional value open finance brings to financial institutions?

DelMedico: Knowing who's coming into a financial institution's environment and why – and what the data they want will be used for – is very valuable for an organization's roadmap development. Solutions such as AllData Connect help financial institutions learn more about how their consumers and small business customers are engaging with third parties and for what purpose. That can help them prioritize efforts and stay competitive. For example, if a significant number of customers are engaging with cryptocurrency services, it may be time to add crypto management capabilities to a financial institution's offerings.

And when financial institutions are really good at using their own data, it opens opportunities to extract greater value, including possibly monetizing the information. The ultimate goal is for financial institutions to grow and innovate in ways that enable organizations to receive significant value from the services they're offering.

Fiserv and MX are working together to enable that outcome, as well as improve consumer data access and accelerate the future of open finance. We know a more connected, frictionless and secure financial ecosystem puts the customer experience at the center and benefits everyone.