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How FDX standards are paving the way for open banking in North America (VB Live)

Presented by Envestnet | Yodlee

Open API standards are starting to be implemented in the U.S. They’ll drive innovation and international collaboration, improve transparency and user consent, and ensure data security. Join this VB Live event to learn how to make the most of this emerging open API economy.

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Financial institutions and fintechs are increasingly embracing open API standards, which help them connect with customers and deliver innovative services that improve customer financial health and deliver surprise and delight in brand-new ways. But there’s been no official standard framework for APIs in the U.S. — until now, with the establishment of the Financial Data Exchange.

“FDX is dedicated to unifying the entire financial services ecosystem around a common, interoperable, royalty-free standard for secure access-permissioned data-sharing,” says Don Cardinal, managing director of the Financial Data Exchange. “We’ve baked in a lot of security protocols and best practices and recommendations along the way, because a spec is only as secure as the folks implementing it.”

The board of FDX is comprised of many major financial institutions and Fintechs, including Bank of America, Capital One, Charles Schwab, Citigroup, Experian, Fannie Mae, Fidelity Investments, JPMorgan Chase, Wells Fargo, Envestnet | Yodlee, Finicity, Plaid, and more. The protocol is based on “The Five (5) Core Principles of Data Sharing,” developed by thought leaders in the financial industry leveraging input and insights from regulatory entities and other worldwide standards bodies.

Not only do the standardized API protocols give consumers better control over their personal financial data, they offer financial institutions an easy, secure way to share consumer data with the fintech companies that are developing the services that consumers want. It includes more than 600 data elements, including investments, tax forms, retirement funds, auto loans, home loans, home equity loans, property and casualty, pensions, and more.

“An API is a fundamental loading dock, if you will, and having one that’s standardized allows everyone to plug and play,” Cardinal says. “It allows some cool stuff.”

He points to services like Experian Boost, which helps consumers with a short credit history or no credit history at all still get approved for new credit applications based on their good financial discipline. And some firms are now able to offer cash-based scoring. You might not have a long credit history, but your net cash flow proves that you’re a solid risk.

“At its core, you’re talking about efficiency and cost savings as well,” says Tom Carpenter, director, public affairs and marketing at FDX. “It’s especially important for financial institutions, and specifically in the U.S. for this long tail of small community financial institutions and credit unions who don’t typically go build their own tech stack. It gives them the ability to play at the same level, on an equal playing field, across the board.”

“It also creates a common layer of standards when developing new services,” he adds. “If an FI knows that the tech can make sure the data moves securely, efficiently, and with proper consumer consent and transparency, it can spend its money and focus on tailoring the value-add on top of there.”

“It can focus on the business case versus just building the same thing over and over again within the industry,” Carpenter explains. “That’s where we also see a lot of desire — even though you have friction in the industry, and high competition, everyone is coming to the table with similar problems. Whether it’s data quality on the aggregator or the app side, or whether it’s moving away from screen scraping on the FI side, or just making a system move a lot smoother and a lot more efficiently, there’s a lot of value-add here.”

FDX is also working to define standards around user experience, based on focus group testing. It offers guidance in finding the balance between making sure the consumer has everything they need to make a good decision, and at the same time, not being so burdened by the process of interacting with the financial services company and its application that they just quit.

“We’re trying to, one, design the ecosystem around a common API, but then two, provide additional guidelines and standards for what it looks like to provide that transparency,” Carpenter says. “How do you provide that common language so you’re not reading through 40 pages of Ts and Cs?”

At the moment, FDX has almost 200 member organizations and growing, from the fintechs that serve small and regional financial institutions and credit unions to academics, consumer groups, and major financial institutions.

“We’re excited about how that collaboration works and what else we’re able to do in the space,” Carpenter says. “We’re not a silver bullet. Standards cannot solve every single problem. But we are making a lot of progress, and we do think we’ve accomplished a lot in a way that means that the industry is defining the standards. The industry is going to be able to keep pace with the innovation and the needs of the market.”

To learn more about how open API standards are being developed, the major new opportunities standardized APIs are unlocking, and more, don’t miss this VB Live event!

Registration is free here.

Attendees will learn:

  • What the U.S. can learn from Europe’s open API standards
  • The latest on open API standards in the U.S.
  • New partnerships and opportunities

Speakers:

  • Don Cardinal, Managing Director, Financial Data Exchange (FDX)
  • Jeff Schulte, VP – Operations Scalability and Architecture, Envestnet | Yodlee
  • Dan Martin, Senior Director, Product Architecture, Envestnet | Yodlee
  • Evan Schuman, Moderator

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