3 Keys to Identifying the Right Financial Data Aggregation ...

3 Keys to Identifying the Right Financial Data Aggregation and Intelligence Provider

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E B O O K

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Table of Contents

Open Banking 101 3

Consumer Projections 6

Financial Institution and FinTech Projections 8

Why FIs and FinTechs Need Trusted Access to the Best Data 10

What to Expect from Open Banking 12

1st Key: Secure Access You Can Trust 14

2nd Key: Data Quality and Coverage You Can Rely On 16

3rd Key: Data Quality and Coverage Your Cutomers Can Rely On 18

Why It Matters 20

Envestnet | Yodlee 22

© 2021 Envestnet | Yodlee. All rights reserved. Technology protected by one or more U.S. Patents or Patents Pending. Use subject to license terms. May include materials developed by third parties. Yodlee and the Yodlee Logo are trademarks or registered trademarks of Envestnet | Yodlee in the U.S. and other countries. All other trademarks mentioned in this document or website are the property of their respective owners.


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Open Banking 101

Open banking is gaining momentum around the globe. Open banking refers to consumers’ ability to allow third parties, such as financial institutions, wealth management firms, and FinTechs, to access the consumer’s account data. Typically, this is achieved through simple and secure API access. It allows consumers to control who has access to their personal data, while financial services providers gain access to invaluable insights that aid their understanding of the customer, marketing personalization, and customer service.

Open banking can be used by consumers to find the best credit and savings deals they’re eligible for, more securely share and view all of their various financial accounts and transactions in one place. It also allows for personalized financial advice, peer benchmarking, and more. For financial services providers, it allows them to gather business intel, such as insight into accounts their customers hold at other institutions, how account holders earn and spend their money, and insight into how best to market to these consumers.1

“Customers are looking for easier, more seamless and intuitive value-added banking experiences, and there are a growing number of FinTechs and ‘challenger banks’ seeking to capitalize on these developments.”1

1 “Open Banking Opens Greater Value”, https://home.kpmg/xx/en/home/insights/2019/05/open-banking-for-greater-customer-value-fs.html

http://www.americanbanker.com/issues/178_39/what-consumers-want-in-pfm-tools-hint-not-pie-charts-1057082-1.html


Global Open Banking

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Open banking is gaining momentum after having started in Europe, but initiatives are popping up all around the globe. India and Singapore have taken a market-driven approach to open banking, with their governments taking action to free up access. The U.S. also is expected to take a market-led approach, but the government has been slow to move, even though U.S. financial institutions are cognizant of the strategic need. Australia and Hong Kong have taken a regulatory-driven approach. Notably, Australia’s policy extends well beyond banking, although that’s where it will begin, into energy, telecommunications and other industries.2

2 “Open Banking Around the World: Towards a Cross-Industry Data Sharing Ecosystem”, https://blogs.deloitte.co.uk/financialservices/2018/11/open-banking-around-the-world-towards-a-cross-industry-data-sharing-ecosystem.html#_ftn2



Consumer Projections


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As consumers begin to understand the empowering capabilities of open banking, they will force financial service providers toward open banking for improved, security, customer experience, and convenience. The international pressure for open banking also creates great opportunities for nimble FinTechs and so-called challenger banks.4

3 “Juniper Research: Open Banking Users to Double by 2021, as Consumers Seek Deeper Financial Insights”, https://www.businesswire.com/news/home/20200518005518/en/Juniper-Research-Open-Banking-Users-to-Double-by-2021-as-Consumers-Seek-Deeper-Financial-Insights4“Open Banking Opens Greater Value”, https://home.kpmg/xx/en/home/insights/2019/05/open-banking-for-greater-customer-value-fs.html

02019 2021

18,000,000users

40,000,000 users

10

20

30

40

Consumer Open Banking Usage to Double3



Financial Institution and FinTech Projections


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KPMG has predicted fundamental changes to the industry as a result of open banking in the way of operational specializations:

Front-end providers or “ecosystem orchestrators” delivering superior service

Product specialists that nimbly respond to individual consumer needs

Infrastructure giants leveraging economies of scale and operating efficiencies5

These structural changes could lead to significant opportunities for all the different types of financial services providers remaining. Infrastructure providers on the back-end can specialize in reliability, business continuity, and cybersecurity, attracting many of the other two types of institutions remaining to their platform. Likewise product specialists can focus on ensuring consumer needs are met with best-in-class offerings, choice, and convenience, while service specialists serve to streamline and humanize the experience for consumers.

Together, all three might expand into other areas of service by leveraging their combined specializations for exponential scale they could not achieve individually. For example, as open data generally gains popularity, KPMG suggested this potential ecosystem could lead to demand for broader personal data banks, beyond financial data and transactions.

5“Open Banking Opens Greater Value”, https://home.kpmg/xx/en/home/insights/2019/05/open-banking-for-greater-customer-value-fs.html

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Why FIs and FinTechs Need Trusted Access to the Best Data


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In a world where consumers feel everything is spiraling out of control around them, possessing a sense of control over their finances offers improved personal agency. Taking ownership of personal finances allows people to feel empowered in their financial life, and that’s exactly what financial institutions and FinTechs can offer them. Using open APIs and permissioned access to their data, banks, wealth managers, and FinTechs can provide consumers more control over their data and how it’s used, as well as an improved user experience. In return, financial services providers gain access to more of their data to provide better services and new revenue streams through deeper understanding and customer relationships.6

Benefits to Consumers:• Bolstering trust, security, and privacy • Viewing a 360-degree view of their

finances in one place • Simplifying smart device payments• Easing remittance and

currency exchange• Receiving personalized,

relevant service• Speeding up credit decisions• Allowing more options• Providing convenience

Benefits to FIs and FinTechs:• Being compliant with emerging

open banking requirements• Staying competitive and gaining

advantage• Delivering innovative services

focused on the customer or customer needs

• Participating in a collaborative, open banking ecosystem

• Reducing data security and privacy risks

• Improving customer engagement• Leveraging business partner

relationships more easily

6 Open Banking: Who Will Really Get Benefitted?, https://teknospire.com/open-banking-benefits/


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What to Expect from Open Banking


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Financial institutions and FinTechs must be able to identify the best open banking partner for their strategic needs. The future of their business model depends upon partnering with the right firm. Banks and FinTechs must seek a company that:

Offers trusted and secure access to financial data

Provides comprehensive access to quality data at scale

Produces actionable intelligence from that data

Without responsible data access and security, there can be no trust – and that passes down through to your customers, so selecting the company with best-of-breed security and responsible data access is key. But the data is only as good as it is all-encompassing and intelligible. Choose a financial data aggregation partner that has trusted access to the most comprehensive financial data and is able to enhance and standardize the information into an easily digestible format. Finally, financial services providers should look for a company that can deliver valuable insights from that data, which can be immediately employed by both your company and your customers in real use cases.

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1st Key: Secure Access You Can Trust


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A secure trusted, and open ecosystem is necessary to leverage all the advantages open banking has to offer. Ensure your open banking partner has appropriate security and privacy safeguards in place and performs regular audits it shares with its customers. Encryption should go above and beyond standard requirements. At the same time, how it collects and uses the data must be compliant and transparent. OAuth, or Open Authorization, allows for secure passage of information between consumers and financial services providers without sharing passwords and is the leading security standard for privacy and regulatory compliance.7

Open banking compliance and explicit consumer consent are must-haves to reduce risks to financial services providers. Beyond trust and compliance, trusted access also means reliability for financial services providers and consumers. Open banking with the right partner allows for flexible and scalable integration to future proof your company. The UK and Australia are already on their way to open banking with more countries joining the ranks, so you need a partner that’s ready with the secure access you need at scale.

Licensing andGovernance

Use CaseSupport Authentication

Real-timeData

APIs for Data Access

DataEnrichment

PaymentNetworks

DeveloperSupport

7 What is OAuth and How Does it Protect my Personal Information?, https://www.hp.com/us-en/shop/tech-takes/what-is-oauth



2nd Key: Data Quality and Coverage You Can Rely On


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When undertaking a project on such a massive scale, you need a partner that can deliver. Pay careful attention to the data coverage and quality of your prospective data aggregation provider. Consider the extent of data sources, the quantity of consumers its partners serve, and the types of accounts covered. Understand the data science applied to ensure the data is accurate and useful. The combination of these open banking platform characteristics will deepen financial services providers’ use cases. When evaluating a data aggregation partner consider what the onboarding process looks like and the verification service used to enable you to grow and scale. Additionally, explore the process used for enriching the data and review of the data to ensure it makes sense to humans, from merchant categories to transaction descriptions.

Machine Learning ThroughPattern Recognition

TransactionDescriptions

Assign AdvancedCategorization

Multiple Data Sources with

Merchant Info

Removal of Non-CriticalInformation

Matching Algorithms

Based on Regionand Context


3rd Key: Data Quality and Coverage Your Customers Can Rely On

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Y-Mart Refund$10.794/8/21

Y-Mart Credit Card Payment-$423.65

4/3/21

Y-Mart Paycheck$987.31

4/1/21

Y-Mart Paycheck$987.31

3/15/21

Y-Mart Purchase, Ft. Worth, TX-$65.43

3/27/21


4/1/21

MARCH 2021

APRIL 2021


3/12/21

Y-Mart Credit Card Payment-$423.65

3/16/21


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As consumers, we’ve all experienced the frustration of transactions in our bank accounts labeled ‘ACH Transaction 02347,’ which is meaningless to the consumer. You need a partner that can scrub that transaction data, so consumers receive clear, actionable information regarding their spending and budgeting.

Machine learning and data science algorithms provide the most accurate classifications and standardization to deliver useful, personalized financial advice for consumers, creating customer satisfaction and loyalty. Real-time, predictive data will also provide contextualized, actionable intelligence about consumer needs and behavior.

Enriched data and insights in an attractive dashboard interface allows financial services providers to deliver a more personalized end-user experience. Adding peer benchmarking capabilities helps the end-user visualize how their expenditures, credit usage, and budgeting measures up to others. Providing all their financial data in a real-time, easy-to-read format will give consumers the greater sense of control they crave with the personalized insight to take action for improved financial stability.


Why It Matters


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The number of consumers using open banking is growing exponentially, and the COVID-19 pandemic has only heightened demand for the digitization of financial services and the focus on data security. As financial service providers adapt to their new environment, they must be more nimble in how they partner with third-party providers to meet the challenge to provide modern solutions for tech savvy consumers accross multiple apps. Open banking’s evolution will progress past mere data sharing in providing financial services. Machine learning, artificial intelligence, and other cognitive technologies are opening the banking world to truly knowing your customer and bringing them along their journey to financial wellness.8

If your financial services cannot compete, your company will be left behind in the battle for customer service and, thus, loyalty and trust. Handing over greater control and convenience to consumers is the future of banking, and open banking will get you there. Using financial data aggregation and insights across various types of accounts and a multitude of providers gives you the power to deliver personalized services and actionable intelligence to your customers. In turn, you can earn consumers’ trust and loyalty, because they know who took action to help them comprehensively understand their financial situation and smooth their path to financial wellness.

8 2021: The Year of Open Banking, https://internationalbanker.com/banking/2021-the-year-of-open-banking/ 9 “The Intelligent Financial Life, https://www.envestnet.com/intelligent-financial-life

“We believe the age of the intelligent, connected financial life is what is next for our industry…This is a unified experience that will accompany a person from the first dollar they spend to the decisions made for their family’s financial future. Integrated. Connected. Intelligent. Helping to make better financial decisions to balance their financial needs today, while building to meet their aspirations for tomorrow.”9

Bill Crager, Co-Founder/CEO, Envestnet


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Envestnet | Yodlee Envestnet® | Yodlee® is your data aggregation and intelligence partner for faster innovation, increased revenue, detailed customer insights, and personalized user experiences.

We provide responsible, trusted and secure open banking access to the most comprehensive coverage and highly accurate financial account data to deliver the innovation and insights needed for consumers’ digital financial future in an emerging open banking world. Envestnet | Yodlee’s Financial Data Platform employs enhanced governance and security, comprehensive data coverage, and transaction data enrichment to offer the flexibility, scalability, and integration financial service providers need, spanning onboarding, payment enablement, actionable insights, and financial wellness solutions. We offer everything you need to transform your solutions to meet consumer needs, from educating your users on financial wellness to engaging them in making better financial decisions, while managing security and risk and completely revolutionizing the consumer experience.

Envestnet | Yodlee’s comprehensive financial data coverage, and extensive data science capabilities have been honed against tens of billions of transactions, allowing us to recognize patterns and develop predictions to provide personalized and actionable financial guidance. We to make transaction data more user friendly, such as identifying the merchant, clarifying the transaction, and sorting transactions into categories. The Envestnet | Yodlee enhanced machine learning and data science algorithms provide clear, concise, and easy-to-use transaction data standardized across any data source. Leveraging these capabilities, we provide financial institutions and FinTechs with the insights to create uniquely simple and personalized digit financial experiences. The trusted access to the comprehensive data means increased unique account types and improved user segmentation benchmarking across a large and diverse user population, providing unmatched depth and breadth across multiple use cases.

For more information, go to yodlee.com

© 2021 Envestnet | Yodlee. All rights reserved. Technology protected by one or more U.S. Patents or Patents Pending. Use subject to license terms. May include materials developed by third parties. Yodlee and the Yodlee Logo are trademarks or registered trademarks of Envestnet | Yodlee in the U.S. and other countries. All other trademarks mentioned in this document or website are the property of their respective owners. Yodlee 3043 04/21

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