5 steps to connect to the open finance ecosystem

Consumers are using fintech more than ever before—to send money, invest, budget, and better manage their day-to-day financial lives. Today, 80% of consumers rely on digital financial tools while the average American uses more than 3 fintech apps. 

As consumers increase their fintech usage, it’s no secret that they want secure and seamless data connectivity from their banks and credit unions. In fact, 69% of consumers would consider switching services if they couldn’t connect their account to a fintech app. 

To keep up with consumer demand, financial services providers are rethinking their business strategy and prioritizing giving customers easier ways to connect to the open finance ecosystem. The first step is building an open finance API.

Open finance APIs enable consumers to securely connect their financial data to the apps and services they use. That allows consumers to have more control over how they share their financial data. Most importantly, APIs offer the flexibility to scale and keep pace with new technologies and growing consumer demands. 

However, even with all of the upsides, building open finance APIs can be complex, costly, and resource intensive. Plaid understands how to simply enable data connectivity. We’ve helped thousands of companies like Wise, MSUFCU and TAB Bank, several of the Fortune 500, and many of the largest banks make it easy for people to connect their financial accounts to their third-party fintech apps. 

In this article, we’ll walk you through the five key steps for building and implementing an API solution so that you can easily and safely connect your customers to the open finance ecosystem. 

1. Consider customer needs

Consumers expect to seamlessly, securely connect and share their permissioned financial data. They also want transparency and control around how their data is being used and protected. Nine in ten consumers want greater control over their financial data, with 83% preferring to choose where it’s shared. 

Consumers already understand the basics of connecting their financial accounts to the apps and services they use. They’re seeking broader access to the latest fintech tools that support things like cross-border payments, cryptocurrency trading, and digital wallets. Banks can satisfy their customers by working with a data network that can access thousands of fintech apps developed in the US, Canada, and beyond. 

API solutions can best meet consumer needs when they’re part of a broader API-first open finance strategy. That means creating flexible, integrated APIs that are building blocks supporting future business growth. Today the majority of Plaid’s connections occur through APIs and more than 7,000 apps and services are powered by Plaid’s API-first network.  

2. Design simply

Consumer needs will continue evolving along with fintech innovation so it’s important to create a simple, flexible API implementation. Start with an interoperable API standard. This allows you to build just one connection to all partner endpoints, including data networks (like Plaid) and third-party applications. That makes it easier for financial institutions of all sizes to grow with the financial ecosystem.  

Financial Data Exchange (FDX) has developed the predominant interoperable API standard now used by over 42 million consumers for data sharing. 

For more information about FDX, read our article “What is FDX and why does it matter?” 

Plaid’s Core Exchange data connectivity solution helps you build an interoperable API solution that aligns with FDX API standards. Core Exchange simplifies implementation and connects your customers to Plaid’s ecosystem of apps and services. With Core Exchange, you can manage a successful API integration and connect to the open finance ecosystem in just 6 to 8 weeks. 

3. Ensure privacy & security

Consumers are concerned about data security. Ninety-two percent (92%) said that keeping their information secure and private is extremely important to them. 

To better protect your customers, use privacy and security tools such as Plaid IDV, which reduces fraud by ensuring users are who they claim to be. Plaid IDV analyzes hundreds of attributes for signs of fraud using machine learning.  

OAuth-based authorization—the gold standard—allows users to share their financial data with third parties without sharing account passwords. This expedites onboarding and provides customers with a better user experience. Get started with OAuth by partnering with identity management companies like Okta. 

With Plaid’s Privacy Controls, you can give your customers data transparency and control throughout the data-sharing lifecycle—from initial connection through ongoing connection management. With these tools, customers can easily see which apps they have given permission to access their data. 

4. Manage consumer data

According to Plaid’s research, consumers want to be able to see and manage who is accessing their data and which information they’re sharing with each fintech app or service. With Plaid, you can give them just that.

Your customers can easily manage their data-sharing connections with data management tools like Permissions Manager and Plaid Portal. Permissions Manager lets your customers view and manage their connections from your institution’s website or mobile app. Plaid Portal is a dashboard that allows consumers to view and control any existing connections they’ve made with Plaid. With these tools, your customers can minimize the amount of data they’re sharing with third parties. 

“With Permissions Manager, our customers can easily make changes to which apps are linked to their Wise account. When customers can see the changes in their data permissions in real time, it builds a layer of trust,” said Ankita D’Mello, Senior Product Manager at Wise, a cross-border payments provider.

5. Remain at the center of your customers’ financial lives

Building simple, effective API solutions helps you stay at the center of your customers’ financial lives. Seamless data connectivity increases loyalty and engagement and creates a deeper understanding of your customers' evolving financial needs while unlocking insights. You’ll then be poised to offer tailored financial products and services. It’s a virtuous cycle that benefits your customers and your institution. 

Nick Craven, SVP of Commercial & Consumer Banking at TAB Bank agrees. “We believe banking should be defined by relationships–not transactions–which is why we’re committed to building the solutions our customers need in order to stay secure and capitalize on whatever opportunities come their way. When they succeed, we succeed.” 

Creating financial freedom for everyone 

Using these five simple steps, you can connect your customers to the open finance ecosystem, help shape the future of digital financial services, and deliver financial freedom to your customers. 

→ Learn how Plaid’s open finance solutions can help you create more freedom for your customers