Sep112023

Consumer expectations for digital financial services are shifting. More than eight in ten Americans use financial technology – or fintech – to manage their money, and 93 percent say they benefit from digital financial tools to budget, spend, save, and invest their money, according to The Harris Poll. 

Critical to those innovations is open banking, or consumers’ ability to access and securely share their personal financial information with preferred digital tools. Open banking not only helps consumers manage their finances but also enables financial institutions of all sizes to offer the digital financial apps and services that their customers want. 

Today, thousands of small financial institutions – including community banks, credit unions, Community Development Financial Institutions, and Minority Depository Institutions — have access to and are adopting open banking, which helps them meet those consumer expectations and remain competitive – even without a big technology budget. Open banking levels the playing field and helps financial institutions of all sizes offer tailored, personalized services, such as:

  • Connecting consumers to the world of fintech apps like budgeting tools, payment platforms, investment advisory services, and more.
  • Building their own fintech apps so they can compete with larger banks.
  • Extending access to credit through a more holistic view of consumers’ financial health.
  • Better serving small businesses with products and services made for their needs. 

Case Studies: How Banks and Credit Unions Use Open Banking to Provide Better Digital Experiences 

Connecting to apps and services has become such a priority that 69 percent of Americans said they would “consider switching banks if my primary bank couldn’t connect to my financial accounts.” Moreover, over 75 percent of Americans say it’s essential to be able to connect their bank accounts to digital finance apps and services.

Here are examples of credit unions and banks across the country using open banking to meet consumers’ expectations for the digital age: 

  • Maps Credit Union has seen firsthand how open banking can help better serve customers. Recently, the Salem, OR-based credit union helped stop a fraudster from gaining access to a member’s account. MX Data Access, a secure, open finance Data Access API platform, challenged the compromised login process, and the scammers abandoned their attempts. In just this one instance, the benefit of Open Banking was clear — secure, reliable, and transparent connectivity that safeguards both consumers and the organization from bad actors.
  • Michigan State University Federal Credit Union (MSUFCU) has relied on open banking technology as a way to engage and retain younger banking customers who want to have the traditional bank account with the connectivity to apps and services that their peers use daily. MSUFCU can retain the community engagement and relationship that they are known for while still staying competitive with the nation’s largest banks. 
  • TAB Bank started as a banking service for on-the-road truckers and today is a fully digital bank. They’ve embraced open banking as a way to enable their customers’ usage to the fintech apps and services they want and need. Since implementing Plaid, they’ve seen a significant decrease in support calls.
  • University of Wisconsin Credit Union uses Plaid open banking APIs to offer their customers a better digital experience including access to fintech apps and services. Using Plaid’s open banking APIs, UWCU customers have reliable and secure access to thousands of apps and services that allow them to manage their money how they choose.
  • Whatcom Educational Credit Union (WECU) leverages open banking to help meet its members’ demand for digital experiences. WECU uses Plaid’s open banking technology, allowing members to access their WECU accounts through the world of fintech apps and services. WECU also leverages Plaid to power its mobile banking app and new accounts processes for its members, allowing them to simply track their finances all in one place and streamline the funding of new accounts. Since partnering with Plaid, WECU has seen a significant adoption of this technology, allowing it to deliver on its digital delivery objectives.

Secure and Reliable Connectivity for All

Open banking in the U.S. has primarily been industry-driven, and the Financial Technology Association (FTA) welcomes federal efforts to safeguard innovation with clear rules of the road. The Consumer Financial Protection Bureau’s rulemaking under Section 1033 of the Dodd-Frank Act can create a strong personal financial data right and pave the way for continued competition and choice in financial services. 

Over the last few years, data platforms have worked in coordination with financial institutions of all sizes to move away from a process known as ‘screen scraping’ and instead share consumer-permissioned data through secure application programming interfaces (APIs). 

Industry and regulators have recognized the importance of supporting the industry’s shift to newer secure API technology while protecting consumers’ data access. However, preserving consumers’ ability to share their financial data with third-party digital tools is critical. FTA has encouraged the Bureau to embrace a responsible adoption and implementation timeline so consumers don’t lose access to financial services they rely on, and smaller institutions have ample time to adopt APIs.

Looking ahead, open banking can be a powerful tool to help small financial institutions compete – and keep the banking sector vibrant and thriving. 

Catch Up on FTA’s Open Banking Advocacy