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COVID-19 caught some financial institutions unprepared to service their customers without access to branches. Transformation projects, slated for the future, had to occur in a matter of weeks.
Today, data firm Plaid is launching Plaid Exchange, an open finance platform for financial institutions to provide their customers data portability.
Source: Plaid
Customers want to understand their financial health. For people with accounts at multiple banks, getting a full picture means aggregating and crunching their account data across financial institutions. The easiest way to do this is via APIs, which many banks lack the technology resources to create and integrate.
“External APIs and partnerships should be considered as a means of accelerating innovation in open finance," said Kieran Hines, senior banking analyst at Celent. "This requires banks to pay careful attention to the experience of both developers and the end-customer, as well having the appropriate frameworks, agreements and configurations in place."
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Plaid Exchange gives banks and other financial institutions a token-based API solution that connects with the 2,600 apps on the Plaid network today. These institutions need to integrate once to the Plaid Exchange in order to get access to multiple data partners.
With Plaid's newest product, banks can get to market in as little as 12 weeks, in comparison to a longer cycle if they were to build out API capabilities in-house. Implementing Plaid Exchange can also help FIs save on the costs associated with standing up an API, like building tools and programs to manage developer testing, implementation, and risk management.
Consumer permissioning is big theme in open finance, as institutions connect to more apps their customers are using. "At the heart of this platform is the ability for consumers to maintain control and transparency into where and how their financial information is permissioned and shared, increasingly important as more people rely on a variety of digital financial tools to manage their financial lives," said Niko Karvounis, head of product, institutions at Plaid.
Within Plaid Exchange are tools that financial institutions can use to build consumer control centers. This gives end users visibility into where their data is being shared and the option to turn sharing on or off.
There are growing initiatives to standardize the sharing of financial data. The Financial Data Exchange, or FDX, has bank and fintech members working together to agree on policy. Plaid Exchange was designed to reflect some of these key principles around access, consumer control, transparency, and security.
To create Exchange, Plaid spoke with over a hundred financial institutions to understand their priorities. The company developed a solution that it believes encompasses what institutions need to implement an API data access strategy.
"Building on innovation opportunities spurred by open banking, the broader concept of open finance is rising up the industry agenda. Banks that fail to take advantage are missing out on strategic growth opportunities,” said Celent's Hines.
Plaid was acquired by Visa in early 2020 for $5.3 billion.