The Evolution of Data Sharing Part 3: Building on FDX to Achieve True Open Finance

Data sharing part 3

Part 3 of 3

Open finance has transformed how consumers and businesses engage with their financial information. It makes permissioned financial data available to a seemingly endless variety of products, services, and applications so consumers can transfer funds, make payments, invest, budget, apply for credit, and much more at their convenience.

The catalyst for this transformation has been the financial data exchange (FDX) standard. As noted in part one of our series on the evolution of data sharing, FDX was created to provide an industry standard for data sharing and the authentication processes surrounding it. And in part two, we explored how FDX is helping financial institutions (FIs) deliver a seamless and embedded banking experience to business customers without leaving their preferred applications.

Here we’ll dive into how FDX is changing the potential of data accessibility and usage in open finance, helping FIs leverage permission-based connectivity solutions to deliver banking and financial management directly into customers’ hands through secure branded apps. 

FDX is Unlocking the Real Potential of Open Finance

FDX has significantly changed open finance by transforming financial data accessibility and usage, creating unified open finance standards, supporting user-permissioned data sharing, and ensuring data security and privacy. 

At the FDX Global Summit held last month in Washington, DC, the keynote speaker CFPB Director Rohit Chopra spoke about the very likely possibility that multiple standards may evolve in the market. The key takeaway for many being that the future will likely welcome flexible solutions with a protocol-agnostic approach to meet any future evolving mandates. As FDX is the leading standard today, let’s take a closer look at how FDX has influenced open finance:

  • Unified standards and interoperability
    FDX ensures universal secure and standardized communication between FIs and third-party providers. This drives industry adoption and interoperability by aligning with global standards such as Open ID Foundation’s financial-grade API (FAPI). APIs used in proprietary, non-FDX applications can be inconsistent and essentially operate in information silos, which limits their ability to integrate with other services, but a unified standards approach eliminates this issue.
  • User-permissioned data sharing
    FDX protects FIs by allowing them to provide third parties with permission to access their financial data and giving them control over exactly which accounts and data elements are shared. It also enables them (and customers using their apps) to revoke access at any time. Consumers using apps that are not FDX-compliant may struggle to manage permissions and inadvertently share more data than intended or desired.
  • Data security and privacy
    FDX-compliant applications use advanced features such as tokenized data to ensure the security of sensitive consumer information during data exchange. They also support consumer privacy with data minimization, meaning that consumers only share the minimum information necessary to use apps and services. Applications that don’t embrace these standardized security practices may rely on less effective methods that increase the risk of data being compromised during transit or in storage.

Realizing a Customer-Centric Approach

Open finance’s critical role at the heart of a customer-centric approach is meant to enable financial institutions to deliver the experience customers expect across a wide range of use cases. Implementing an FDX-enabled open finance strategy with a purpose built solution, like Ninth Wave Connect, allows FIs to realize a number of game-changing benefits including:

  • Flexibility to meet consumer preferences
    Not all customers want or need the same things. Using an FDX-compliant open banking API such as Ninth Wave Connect enables financial institutions and third-party providers to provide customers with the ability to securely and reliably access their financial data for a wide range of purposes including personal financial management (PFM), bill payment, tax preparation, wealth management, and much more.
  • Increased customer satisfaction: The high level of reliability provided by open finance solutions such as Ninth Wave Connect minimizes data connectivity issues, contributing to a much better user experience and ultimately, higher customer satisfaction.
  • Significant resource savings
    Creating and maintaining open finance APIs is complex and resource-intensive. A well-designed FDX-compliance open finance solution will handle critical steps for the FI such as complex data access certification processes which result in considerable time and money savings, allowing the FI to instead focus on core competencies.
  • Regulatory compliance
    An FDX-compliant open finance solution enables FIs to proactively ensure adherence to regulations such as the CFPB Dodd Frank 1033 rule for retail and small business banking and credit cards.
  • Improved security and control
    The advanced security and consumer privacy offered by FDX-compliant open finance solutions ensures the highest level of protection for sensitive financial data and can strengthen an FI’s reputation by eliminating risky practices such as screen scraping. Providing customers with control over which accounts are permissioned for data sharing and what data elements may be shared ensures full transparency and builds trust.

Financial Institutions Need to Take a Proactive Role

Bank customers demand anytime/anywhere access to their financial data. Whether they want to pay a bill, transfer funds, or apply for credit, they expect the experience to be secure and seamless — and to have control over what data is shared and with whom. FDX has helped make this possible by prioritizing data security, interoperability, and consumers’ evolving needs.

To remain competitive, financial institutions must take a proactive role in embracing FDX-compliant open finance solutions that enable them to support a comprehensive, flexible, and customer-centric strategy for financial data sharing.

FDX-compliant open finance solutions like Ninth Wave Connect extend far beyond the basics of FDX with intelligent connectivity and administrative control that helps financial institutions give consumers the experiences they expect. Ninth Wave Connect’s unique design helps FIs deploy these solutions while saving them significant time, reducing costs, and ensuring regulatory compliance. Schedule a demo today to see what Ninth Wave Connect can do for you and your customers.

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About Ninth Wave

Ninth Wave delivers secure, seamless, and standardized data connectivity to fintechs and financial institutions of all sizes, through a single point of direct integration to a universal suite of open finance APIs. With configurable controls, visibility, and insights into all data sharing and data acquisition connections between aggregators, third-party apps, and internal applications, Ninth Wave empowers financial institutions and their customers with access and oversight to their connected apps, enabling secure data exchange in a holistic and scalable open finance ecosystem. Offering solutions for retail and commercial banks, wealth managers, credit card issuers, tax providers, and more, Ninth Wave provides unparalleled connectivity and universal compatibility to complex information systems, unlocking innovation, potential, and performance for your data. Contact us to learn more about Ninth Wave’s secure data connectivity features. Empowering open finance. At scale, at last.