How people pay bills, shop online, open accounts and experience their finances is evolving quickly. Fintech innovations are altering the way consumers think about and relate to money. The COVID-19 pandemic has only accelerated the digital transition. The shifting reality of how finances are managed is underway. Bank branches and paper checks are an afterthought to a growing number of consumers. Eight in 10 Americans are linking their bank accounts digitally, using these connections to automate everyday tasks like paying credit card and utility bills, according to Mastercard’s new study, The Rise of Open Banking.
The sea change in consumer expectations is already in motion. With every leap in speed, security, and ease of use, open banking apps and services usher in the next generation of finance. The advent of the internet has trained the human mind to process far more information than in the past, and to do it quickly. When it comes to their personal finances, people want the real-time data whenever they want it. Save them time and money, and enhance their financial health, or they won’t adopt your platform.
1. Saving More Time, Creating Less Work
Just a handful of years ago, a group of friends out to dinner would have to all reach into their wallets and purses, chip in cash, write a check or stack a pile of credit cards on top of the bill, and wait for the server to swipe them all. With the massive adoption and growth of P2P payment apps, these antiquated processes are quickly becoming a thing of the past.
In real time, payments can be split between friends with a few taps on the mobile screen. Digital wallets allow a busy shopper to tap their phone against a payment terminal and breeze through checkout at retail stores. Encrypted credit card info auto-populates, saving time and reducing user error when shopping online. The countless hours these new processes save is the biggest driver for adoption. 59% of study respondents cited this as their number one motivator.
2. Saving Money
65% of Americans don’t know how much money they spent last month. Saving doesn’t come naturally to many people, and our emotionally-charged relationship with money certainly doesn’t help. So much emphasis is placed on new and better ways to spend that saving becomes just a lurking afterthought. Open banking innovators are addressing this huge segment of consumers with a rich slate of apps and services. AI and machine-learning engines do the heavy lifting of savings calculation, goal-setting and projection, raising the level of users’ financial literacy. 42% of Americans surveyed wanted help saving their money, and trust technology to give them the advantage they need.
Open banking technology powers some of the most effective fintech apps for saving money, using artificial intelligence and machine learning to take a deep dive into spending habits and cash flow. Some even gamify finances, injecting the process with fun and some healthy self-competition.
3. Improving Financial Health
Open banking and AI make a powerful duo. Open banking connections to third-party financial service providers are flipping the data experience to favor the consumer. Anyone can download a financial management app, grant permission to access their bank accounts, and be guided easily through opening accounts, investment suggestions, and loan applications. This happens in moments, not hours or days.
Fintech AI systems process massive amounts of data in milliseconds. App and service developers can leverage this power to analyze a consumer’s subscription payments, utility bills, direct deposits and loan obligations near-instantaneously. Machine learning and AI engines can use this rich, real-time data to suggest smart financial planning and investing options. It’s a growing expectation that has to be accounted for in app development. Exposure to the open banking ecosystem is raising the level of consumer financial literacy, and it’s happening quickly. As a result, financial decision-making can improve dramatically. Consumers are seeing the positive results of adoption in their bank balances: 35% of respondents to the survey say improved financial health is why they use fintech.
4. Automate It!
No one leaps out of bed in the morning in wild anticipation of paying the electricity bill. Mundane, time-consuming financial tasks don’t actually have to absorb anyone’s time. Open banking allows easy setup and maintenance of connections to financial institutions, allowing consumers to set a variety of monthly payments and subscriptions to auto-pay. With the average consumer spending $273 per month on a mixed bag of small payments, automation saves a considerable amount of time, and it ensures payments aren’t missed. U.S. households average nine separate payments per month just for entertainment subscriptions. Add gym memberships, retail subscriptions and utilities to an ever-growing list of small, recurring transactions, and the benefit of utilizing technology to manage these payments becomes obvious. 26% of North Americans surveyed are attracted to technology to help them automate these little chores, freeing up their time for more important concerns.
5. Getting a Better Holistic View of Finances
Gone are the days when consumers used file drawers stuffed with manila folders, neatly tabbed, in an attempt to keep checking the pulse of their financial health. Open banking data has spawned a wealth of apps and services that give consumers and small businesses an up-to-the-moment picture of their finances. Open banking connections across accounts and across financial institutions power the apps that consumers are using to take their financial temperature. The growing expectation is that individuals should be able to see what their money is doing and where it’s going, 24 hours a day. 18% of North American users said that tracking their money was a major driver for fintech adoption.
To drill down even further into the use cases driving consumers to fintech, read the full study here.