Breaking Stories

Open Finance’s Future Starts With Consumer Consent

“Historically, the financial services industry has been plagued by paper and offline spreadsheets,” Patrick Nealon, vice president of strategy at Fidel API, told PYMNTS in a recent interview. “But we’re moving toward automation of those tasks through secure connections between FIs and software developers.”

While much of the financial world may be focused on open banking, he said, there’s a broader trend taking shape beyond banking: open finance.

Nealon said the term describes “a new way to approach the sharing and use of financial data.”

Nealon noted that even today, moving from one application within finance to another is clunky and often requires logging off entirely or working one’s way through a range of verification experiences.

Efficient and Secure Identity Verification

Through the past decade and a half, he added, new infrastructure has emerged that can provide software developers a better path towards accessing that critical data.

Orchestrated correctly, he said, open finance application programming interfaces (APIs) can help improve back-end processes at enterprises — and streamline consumers’ lives. By way of example: Brokerages can improve their tax reporting, and banks can extend loans more quickly to borrowers. And no matter the use case, APIs ensure the data is transported as securely as possible.

Security, of course, remains top of mind for both financial institutions and their consumers: With the rewards that open finance brings come the risks that the same pipelines could be under attack by fraudsters.

“Risk and reward are two sides of the same coin,” Nealon said. Infrastructure providers including Fidel API, offer the tools that help developers build experiences that are secure and enable the streamlined experiences that consumers and enterprises want every time they interact.

The optimal way to approach data management and security is to make it “consent-centric,” said Nealon, where consumers know exactly how and why their information is being used (and in what settings). The data needs to stay within the walls of the specific parties that have given that consent. Those enterprises, in turn, need to abide by robust best practices and guidelines such as payment card industry compliance and adherence to regional privacy laws.

There are extra layers of security that can be constructed through open finance tools, including improved identity verification — from the point of initial customer enrollment onward.

Fidel API, he said, runs micro-charges on cards to verify them (with the charges immediately reversed). The method is ubiquitous and able to be deployed regardless of the consumer’s location, card issuer or bank.

“This experience is consistent and powerful,” he told PYMNTS.

Looking ahead, he said that Fidel API would be working to help “centralize the graphing” of where consumers have shared their consent and for what purposes. The graphing could then be made available to those end consumers, who can revoke or extend those consents as they see fit.

“We’re working actively to make this a standard, not just for the card data that Fidel API [accesses] today but for any financial data type. A global consent standard is of the utmost importance,” he said.



About: The findings in PYMNTS’ new study, “The Super App Shift: How Consumers Want To Save, Shop And Spend In The Connected Economy,” a collaboration with PayPal, analyzed the responses from 9,904 consumers in Australia, Germany, the U.K. and the U.S. and showed strong demand for a single multifunctional super apps rather than using dozens of individuals ones.


Tell Me More

What is your reaction?

In Love
Not Sure

You may also like

Leave a reply

Your email address will not be published. Required fields are marked *