Opportunity over Obligation: Considerations for Standing Up an Open Banking API

As Open Banking adoption continues to accelerate, financial institutions of all sizes are exploring the right approach to standing up and maintaining open banking APIs. 

MX has been a leader in Open Finance and consumer-permissioned data sharing for more than a decade, working with financial providers and fintechs to implement APIs that enable the permissioned flow of data. Here are three things to consider when standing up an open banking API:

1. Data is a Two-Way Street

Financial institutions have traditionally had an aversion to sharing their customers’ financial data, often seeing it as the loss of a competitive edge. But, that mindset is outdated as open banking adoption accelerates. The flow of data can — and should — be a tide that rises all boats. 

By enabling the two-way flow of data, financial institutions are able to better understand customer needs, streamline processes, and deliver better products and services. This includes everything from empowering better and faster onboarding through instant account verification to generating relevant and actionable insights that can improve a consumer’s financial life. 

Financial institutions shouldn’t be afraid of data leaving their institution. Instead, they should think about the value they gain as a data provider — better insights into where consumers are turning for their financial needs outside of their organization.

The flow of data along consumer-permissioned channels increases insights and intelligence that can be used by financial providers on both ends of the exchange. 

2. Don’t See Compliance as a Hassle

Compliance and third-party risk management teams at a financial institution are integral to effectively standing up an open banking API. However, these stakeholders are often brought into the process too late. 

Compliance and risk management need to be considered from the beginning. This will facilitate alignment across departments, streamline due diligence processes by engaging early and often, and ensure that the end result is a more secure way for consumers to manage their data. 

More broadly, as open banking regulations take shape, it could be easy for financial institutions to view compliance obligations as a hassle or hindrance. However, there are opportunities for financial institutions that see compliance as more than checking a box. For example, consumers want their providers to know them but, most financial institutions are missing key details on where consumers share data. Open banking data gives you better insights about competitor products that your customers utilize and enables you to create precise targeting and compelling offers. 

3. Keep Consumers at the Center

Consumers own their financial data and should have the ability to control who has access to it. MX research confirms this — 80% of consumers agree it is important for them to know and manage who has access to their financial data. Financial providers need to keep this perspective at the center of their API implementations. 

Whether building or buying an API, financial institutions should focus on facilitating secure, seamless connections that allow consumers to connect to a broad range of banks and fintechs, dynamically revoke access to their data, and educate them on the values and risks associated with sharing their data with third parties. 

Ultimately, standing up a successful open banking API means embracing the opportunities that Open Banking presents rather than merely meeting obligations.