Connect the dots. We’ve all played this puzzle game at some point in our lives. At first glance, you see a disjointed series of dots. But, once you take that pencil and connect them, the picture becomes clear. Consumers face a similar puzzle when it comes to their finances.
The average consumer has at least 5 or more financial accounts with various banks, credit unions, and other financial providers. This disjointed money experience leaves consumers — and the financial providers who serve them — with only part of the picture.
Without connecting those various accounts and sources of financial data together, consumers may struggle to truly understand and manage their finances. And, organizations face significant blindspots when it comes to delivering the right products and services to meet consumer needs, targeting consumers with the right messages, and accurately predicting and preventing churn. This highlights the crucial role of reliable and secure account aggregation.
Creating a Competitive Advantage with Connectivity
Consumers have more choice than ever. In the U.S. alone, there are more than 4,500 banks and another 4,500+ credit unions — in addition to hundreds of different credit cards, lenders, fintechs, and payment apps.
With a myriad of financial accounts spread across financial services providers and little patience for slow or subpar experiences, how can you ensure your organization is top of mind and top of wallet for consumers? Financial providers who will win in today’s competitive market are those who offer an easy way for consumers to keep sight of their full financial picture with connected, data-driven experiences.
Forty-four percent of U.S. adults have used digital tools to bring different financial accounts into one view. This account aggregation allows them to consolidate their finances into a single view rather than needing to login to multiple accounts to see what’s going on with their finances.
By enabling consumers to easily connect all of their financial accounts into a single place, financial institutions can drive higher levels of engagement, deliver more personalized experiences, and gain greater intelligence about their customers. Ultimately, this can translate to higher deposits, loans, and interchange revenue, as well as longer term retention.
Higher Engagement = Higher Deposits
Wherever that single view of their finances lives is where they will engage most often. MX data shows consumers who connect at least one or more external financial accounts are 48% more likely to be digitally active a year later than those who don’t. At the same time, 72% of consumers would likely seek out a different bank or credit union if their current provider couldn’t connect their financial accounts to preferred financial apps or other online accounts. By making it easy to connect external accounts within your banking experience, you can drive higher engagement. And, consumers who engage regularly and often with mobile and digital banking services are more loyal, have less turnover, and maintain higher deposit balances than less engaged consumers.
Better Personalization = Better Retention
Nearly half of consumers (47%) expect greater levels of personalization in banking than ever before. A recent Zendesk survey also found 72% of consumers said personalization is “highly important” to them and 77% of banking leaders said it leads to increased customer retention. But, if you only have some of that data, are your personalization efforts meeting the mark? Fifty-three percent of consumers expect financial institutions to use the data they have about them to personalize their experience. With a connected view of consumer financial data both inside your organization and from aggregated accounts, you can deliver a better experience that meets consumer demands for personalization while driving increased retention.
Increased Intelligence = Improved Outcomes
At the end of the day, it’s all about the data. Connectivity makes it possible for organizations to gain access to larger sets of consumer-permissioned financial data, which fuels intelligence and innovation across nearly all areas of the business. It enables financial providers to gain a holistic view of spending behaviors, patterns, and preferences and better understand their customers so they can increase engagement, improve outcomes, and drive growth. In fact, Forrester Research shared that financial institutions using data to tailor their services and communications see up to a 15% improvement in customer retention rates.
What is Open Finance?
While the ability to connect accounts has been around for decades, not all connectivity experiences are created equal. Historically, connecting an external account relied primarily on screen scraping or credential sharing, which requires consumers to share their login credentials to link their data. However, it’s often a less reliable and less secure method to access financial data.
Enter Open Banking and Open Finance. Open finance application programming interfaces (APIs) allow consumers to access their transaction data without the need to share usernames and passwords, replacing credentials with tokens. This creates higher levels of security, faster speeds, and higher connection success rates. And, it lays the groundwork for a truly open data ecosystem — one where data becomes the fuel that powers new innovation, new insights, and new intelligence.
With reliable access to data, financial institutions, fintechs, and their consumers can better understand and do more with financial data. Companies that have embraced Open Finance and the use of APIs to enable data access are already seeing the benefits. It enables:
- Better Fraud and Risk Management: By leveraging an open finance API rather than screen scraping, consumers never have to share their username and password, and financial providers eliminate the risk of sharing credentials.
- More Accurate Customer Profiles: Financial providers can gain access to real-time permissioned financial data from their consumers. They can easily see where consumers are sharing their data and why it is being used. This helps identify product and partnership opportunities, and make segmentation and targeting more accurate to ensure consumers get the right offers and messages to meet their needs.
- Enhanced Customer Experiences: By putting consumers in the driver’s seat, financial providers can build trust and improve relationships, leading to greater customer satisfaction and loyalty. Consumers have greater control over their financial data with the ability to connect and share their data on their terms. They can also more easily manage and revoke access to their data at any time.
- Personalized Services: By enabling consumers to easily connect external financial accounts, businesses can gain greater insights into their customers, better understand specific customer needs or preferences, and tailor their offerings accordingly. For example, a bank may offer investment opportunities to customers who have a higher disposable income, or provide budgeting tools to those who struggle to manage their finances. By offering more personalized services, businesses can create a stronger connection with their customers, leading to increased loyalty and retention.
- Data-Driven Decision Making: Businesses can gain insight into trends and patterns that may not have been apparent before. This can help businesses identify new opportunities, optimize their operations, and make more informed decisions about product development and marketing strategies.
As financial institutions and fintechs look at ways to more effectively engage consumers and, ultimately, grow and retain deposits, it starts with reliable connectivity. Open Finance gives consumers and financial providers better access, visibility, and control into who has access to financial data.
With modern, open finance APIs, financial services providers can unlock even greater value from consumer-permissioned financial data. Previously, organizations could only tap into held data — the data they have within their core systems about customers — to understand and serve their consumers. With open banking, financial providers gain access to consumer-permissioned data from banking accounts, such as checking and savings accounts, outside of their organization. And, now with Open Finance, it’s possible to gain a true 360-degree view of customers with access to consumer-permissioned data across all types of financial products and services, including wealth management, investments, credit cards, loans, and more.