Presented by Envestnet | Yodlee

The global open banking trend is changing the way financial data is accessed and shared in the U.S. Learn why this growing ecosystem offers numerous benefits for those positioned to leverage it with innovative apps and solutions, and more, in this VB Live event.

Register here for free.

Open banking is the notion that consumers should be able to access the information that institutions have about them, should be able to permission its use, and should be able to correct it, and that the institution holding that data has a right to protect it, says Brian Costello, VP of data strategy and strategic initiatives, Envestnet | Yodlee.

Financial institutions should be paying attention to open banking because its an opportunity for them to have better engagement with their customers, Costello says. Its an opportunity for them to gain more insight into their customers behaviors, and see how their products and services can best match the customers needs to create better and stronger relationships.

The principles and tenets of open banking consumer permissioned financial data sharing have been around and used by many financial institutions for more than 20 years, Costello says.

Whats different now is that over the last two or three years the industry has come together to collaborate on evolving the ecosystem. One example is the formation of an industry group called the Financial Data Exchange. As a result, financial institutions, financial data aggregators, and related parties are developing standards for access, authentication, and transparency that will provide end-to-end governance to keep the ecosystem safe and fair, and consumer data secure.

Broad sincere participation of all the stakeholders came after the U.S. Treasury published a report in 2018 that said the Treasury, and by extension the government, recognizes the power for good that consumer-permissioned data sharing can have to improve the financial well-being of consumers at all levels of financial health, needs, and capabilities across the country. And improving the financial wellness of individuals improves the financial wellness of their families, and of their communities. It ultimately has a positive knock-on effect to public policy issues, Costello says: Keeping people away from predatory lenders, avoiding dependence on social assistance, and offering better access to housing and education. And very importantly, solving the looming crisis of underfunded retirement, as well as optimizing fixed incomes for veterans and seniors.

We believe in the power of consumer-permissioned data sharing, Costello says was the message from the U.S. Treasury report. We see whats happening. We think the industry should solve this problem, or at least take the next crack at it.

The CFPB has had rule-making authority to put in place an open banking regulation or open banking regime for ten years. They recently announced a forthcoming Advanced Notice of Proposed Rulemaking after much consultation and consideration of how best to enact open banking in the U.S. The CFPB, the Treasury, and policymakers recognize that our current system of laws, both at the national and the state level, is so complicated that to do this right in a regulatory fashion would require an enormous amount of effort and time to meet the goals of open banking while avoiding unintended consequences.

Since the Treasury report and the formation of the Financial Data Exchange, activity to bring open banking to fruition has accelerated, Costello says. Yodlee and a number of forward-leaning financial industry companies have recently signed a number of bilateral agreements for data access, and will start migrating their client data APIs to the federated identity and authorization scheme that open banking requires.

However, even though the CFPB has rule-making authority to put in place an open banking regulation or open banking regime, they havent. The CFPB, the Treasury, and policymakers recognize that our current system of laws, both at the national and the state level, is so complicated that to do this right in a regulatory fashion would require an enormous amount of effort and time.

Our consumers cant wait any longer, he says. Our small businesses cant wait any longer. So many people are vulnerable. As weve learned over the past few months, so many people are one step away from vulnerability.

Yodlee and other forward-looking financial institutions have their foot on the gas, and over the next year or two were going to see a massive uptick, he adds, not just for the main street banks, but making sure the community institutions, like community banks and credit unions and their customers, get the benefit of this as well.

Banks are looking for technology innovation to address both back office challenges, get faster and leaner, reduce costs, but also to increase engagement with their customers, Costello says. Certainly at times like this we see how important digital engagement is.

As some FIs are closing branches to reduce costs, digital engagement becomes essential. And if its done right, it works. And the opportunity for innovation abounds.

The better multi-factor authentication and authorization that comes with open banking means that the bank has a higher degree of confidence that the person with whom theyre engaging is the account holder. Now that they have a higher degree of trust, they can offer a higher degree of engagement.

Insight into customers financial data helps banks understand their behaviors, helps them identify more capacity for savings and ultimately more capacity for investment, to help them better qualify for lending products, to keep them away from insufficient fund fees.

It also can help customers avoid the vicious cycle of compounding interest accrual on credit cards, Costello says. Over the long term we have to get rid of that, he explains. Our nations financial well-being depends on having more savers and investors than borrowers. And the banks know that. Theyre using the data to make better, less risky, and ultimately more profitable customers.

Dont miss out!

Register here for free.

Attendees will learn about:

Panelists:

Continued here:

The FI and fintech opportunity with open banking (VB Live) - VentureBeat