Identity verification will drive the future of open finance

“Historically, the financial services industry has been plagued by paper-based and offline spreadsheets,” Patrick Nealon, vice president of strategy at Fidel API, told PYMNTS in a recent interview. “But we are moving towards automating these tasks through secure connections between FIs and software developers.”

While much of the financial world may be focused on open banking, he said, a broader trend is emerging beyond banking: open finance.

Nealon said the term describes “a new way to approach the sharing and use of financial data.”

Nealon noted that even today, switching from one application within finance to another is clunky and often requires logging out completely or navigating through a range of audit experiences.

Efficient and secure identity verification

Over the past decade and a half, he added, new infrastructure has emerged that can provide software developers with a better way to access this critical data.

Orchestrated properly, he said, open finance application programming interfaces (APIs) can help improve business back-end processes and streamline consumers’ lives. For example: brokerage houses can improve their tax reporting and banks can grant loans more quickly to borrowers. And whatever the use case, APIs ensure that data is transported in the most secure way possible.

Security, of course, remains a priority for financial institutions and their consumers: with the rewards that open finance brings, there are risks that the same pipelines will be attacked by fraudsters.

“Risk and reward are two sides of the same coin,” Nealon said. Infrastructure providers, including the Fidel API, offer the tools that help developers create secure experiences and enable the streamlined experiences that consumers and businesses want every time they interact.

The best way to approach data management and security is to make it “consent-centric,” Nealon said, where consumers know exactly how and why their information is being used (and within what parameters). The data must remain within the walls of the specific parties who have given this consent. These companies, in turn, must follow strong best practices and guidelines such as payment card industry compliance and adherence to regional privacy laws.

There are additional layers of security that can be built through open financial tools, including enhanced identity verification – from the time of initial customer registration.

The Fidel API, he said, runs micro-charges on the cards to verify them (the charges being immediately waived). The method is ubiquitous and can be deployed regardless of consumer location, card issuer or bank.

“This experience is cohesive and powerful,” he told PYMNTS.

Looking ahead, he said the Fidel API would work to help “centralize the graphical representation” of where consumers have shared their consent and for what purposes. The graph could then be made available to those end consumers, who can revoke or extend those consents as they see fit.

“We are actively working to make this a standard, not just for card data that the Fidel API [accesses] today, but for any type of financial data. A global consent standard is of utmost importance,” he said.



About: Results from PYMNTS’ new study, “The Super App Shift: How Consumers Want To Save, Shop And Spend In The Connected Economy,” a collaboration with PayPal, analyzed responses from 9,904 consumers in Australia, Germany, UK and USA. and showed strong demand for one super multi-functional app rather than using dozens of individual apps.

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