Access denied? How data sharing can shape the future of banking

Banking isn’t what it used to be

FinTech - Mobile Banking - Unified Endpoint Management U[EM]

The days of walking into a local bank branch are long gone—at least for most customers. Forty-six percent of consumers exclusively use digital banking channels compared to just 27 percent in 2012. To keep pace with innovative offerings and digital finance solutions, banks must further embrace digital transformation to define the customer experience. After all, switching banks isn’t nearly as difficult as it once was. Since Accenture’s initial North American Consumer Digital Banking Survey in 2013, “difficulty of the process” has dropped from second to fifth on the list of switching hassles.

The currency of the digital economy? Data. Data promises to play a significant role in the evolution of financial services, new industry business models, and consumer financial wellness. As a result, data needs to be viewed as an innovation engine and not a resource to be, shall we say, locked away in a vault. And yet, the handling and sharing of data must be secure while maintaining privacy requirements.

Banks that allow customers to empower their data by sharing it with financial management apps not only keep those customers from taking their business elsewhere but also stand to make better banking decisions.

Here’s a look at what’s made third-party apps, such as Mint and Mvelopes, so popular among consumers, as well as how new data-sharing standards can set the stage for even more digital disruption.

The rise of third-party apps

When it comes to their finances, most consumers are fighting an uphill battle. In fact, more than three-quarters of US workers live paycheck to paycheck. The growing complexity of financial management is only making matters worse. From IRAs and 401(k)s to loans and investments, consumers often scatter their money across many accounts.

Using the power of data aggregation, financial management apps can help ease the burden associated with tracking a broad range of financial information—regardless of where it may be. Budgeting app Mvelopes, for example, displays information from credit cards, bank accounts, and investment accounts in one central location, making it easier for consumers to gather relevant insights which leads to better decision making. This is also true of other financial management apps like YNAB and MoneyDesktop that have noticeably improved on a traditional view of one’s finances.

Given the growing demand for apps that empower consumers to manage their financial health, it’s crucial that financial institutions demonstrate a willingness to share user-permissioned data. And currently they are, but to accelerate data sharing, standards for global connectivity need to be developed.

Securing data with standards

For years, banks have used data to gain insight into consumer spending and saving habits. Such data, however, hasn’t often made its way into third-party apps, and ultimately into the hands of the consumer. The era of the open financial web promises to change that.

With new financial app providers popping up every day, the walled-garden model for services and the data behind them is becoming antiquated. To meet demands for global financial data sharing, banks, developers, and data aggregators must all work together to drive global connectivity that simplifies and secures the customer experience. Universal standards like OFX 2.2 and the Durable Data API from FS-ISAC can help pave the way for the efficient and secure transfer of customer data. But there is more to be done in defining standards and accelerating adoption across the financial ecosystem.

While consumer benefits of secure data sharing have been well documented, banks also stand to profit from it. The less information a bank has, the harder it is to determine which products or services customers really want. With a complete view of a customer’s financial accounts and transactions, banks can better predict consumer behavior, and perhaps most importantly, cater to the financial needs of consumers.

By creating standards that ensure secure and efficient data sharing, banks can boost retention while also providing access to financial management apps consumers know and love. And in the end, it will improve the bottom line for both the banks and the consumer.

Copyright © 2017 IDG Communications, Inc.