Today, 88% of U.S. consumers use fintech services to better manage their financial lives, but many can’t access secure APIs to share data from their financial services providers. When consumers try to share financial data without APIs, they can experience connection delays or failures or access out-of-date information, which severely impedes their ability to access and benefit from the fintech tools they want to use.
Building APIs might not historically have been financial services providers’ top priority. But in a more connected world, where consumers have more than five accounts on average, interoperability is in high demand. The challenge is that there are many data recipients, and data providers don’t want to build something new for each and every company that consumers want to use. This is where standards can make a difference.
When they build interoperable API solutions, data partners don’t need to establish multiple connections to partner endpoints, making it easier for customers to safely and securely share their financial data with any application. Having a data standard in place allows data partners—from the largest financial institutions and regional banks to fintechs, neobanks, and digital banking platforms—to easily connect and exchange consumer-permissioned data without exhausting resources to support every client. Fortunately, there's the Financial Data Exchange.
Of U.S. consumers agree that “when choosing a bank, the ability to connect my accounts to apps and services I want to use is a top priority.”
Of U.S. consumers agree that “I would consider switching banks if my primary bank could not connect to my financial accounts."
Of U.S. consumers agree that “My bank needs to be able to connect to the apps and services I want to use.”
Source: Plaid Fintech Effect 2021
What is the Financial Data Exchange?
The Financial Data Exchange (FDX) is driving open banking adoption in the U.S. and Canada by providing standard tools for secure and reliable consumer data access. According to their website, FDX is a non-profit, international technical standards body working to align the industry around one common, interoperable, and royalty-free API data standard called FDX API.
FDX takes a market-driven approach by gaining consensus from financial services stakeholders on the best way to build and implement an API solution that helps consumers access their financial data. It has the support of 200+ members including top 10 banks and fintechs. Members lead working groups that develop enhancements and updates to data standards for security, authorization, consent, and the customer journey. There are already 32 million consumers using FDX API for data sharing, according to FDX reporting in June 2022.
“The standard makes connectivity more plug-and-play, which allows fintechs to more easily onboard new players and focus on introducing new capabilities and adding value rather than data formatting.”
What is the FDX API standard for interoperable open banking?
The FDX standard includes all the tools required to build an interoperable API including a list of over 600 different elements that consumers may need when sharing their banking, tax, insurance, or investment data. It provides standards for secure authentication so consumers don’t need to share credentials with third parties, and is designed to improve data sharing performance. Because FDX is an active group with continuous workstreams, the standard can evolve to meet consumer demands and any future regulations.
The FDX API includes:
Standards for secure authentication and authorization
User experience guidelines that define how to initiate, disclose, and select a data provider, as well as authenticate, consent, authorize, and confirm a user's financial data sharing journey
Endpoints and data structures for specific use cases
According to FDX reporting, 32 million consumers use FDX API for data sharing.
→ Need an FDX-compliant financial API solution? Core Exchange enables financial institutions to quickly execute FDX APIs they can use to connect with Plaid, other aggregators, and organizations.
Accelerate your open finance journey: Empowering customers with data connectivity
Why is an interoperable standard important?
An interoperable standard provides a big advantage, especially when consumers connect with thousands of fintech apps across the financial ecosystem.
When you build an API that meets an interoperable data standard, your customers have consistent service across all their external applications, and you only have to service one point of connectivity. With a proprietary, non-interoperable standard, you may need to do custom work for each data recipient or aggregator.
How do FDX data standards help data partners like financial institutions?
FDX standards help data partners stay up-to-date with their customers’ ever-expanding fintech use cases like personal financial management, cryptocurrency, and cash back credit card rewards. FDX will update the API standard to adapt to evolving technologies and protocols and communicate the change to all data partners at the same time to avoid confusion. Consumers are assured secure, reliable connectivity that supports their financial needs.
How do data sharing standards help consumers?
Consumers rely on secure data sharing to power the fintech tools they want to use - including those provided by both new entrants and other financial institutions. When their primary bank uses an FDX-compliant API, they have secure, consistent access to their financial data, helping them improve their financial health. They’re unlikely to encounter connection failures and won’t face delays when they want to send money with Venmo, fund their Robinhood account, or manage their personal finances with TrueBill. They’ll also avoid sharing their credentials with third parties.
FDX, and board members like Plaid, advocate on behalf of consumers, working to ensure data protection laws and regulations keep consumers safe while sharing their information and to provide consumers with rights over their information.
How can Plaid help you build to the FDX API spec?
Plaid has created a no-cost, FDX-compliant API specification called Core Exchange—a scaled-down version of the API standard that’s easy to implement. Core Exchange only includes the data fields necessary to power the majority of popular fintech apps (Plaid’s customers). It also includes a detailed implementation guide (under 15 pages) and a validation tool. Plaid supports data partners throughout their implementation, which can be completed in six to eight weeks.
Plaid was founded on the principle that consumers should get to decide where, how, and with whom they share their financial information. We are aligned with the FDX mission, serve on the FDX board, and participate in working groups that define and develop API solutions.
What’s on the horizon for FDX?
FDX has already made huge progress towards unifying the financial sector around a common data sharing standard. They’ll continue their work toward their stated goal of empowering consumers to better access, understand, leverage, and benefit from their own financial data and improve their financial well-being.
Get started with Plaid’s Data Connectivity solutions.