Searching for the best open banking network, or what historically people referred to as financial account aggregators can mean combing through a ton of choices. In fact, when you search for financial data APIs on review site G2, you’ll see a whopping 92 options. How do you parse through so many companies to find the one right for your fintech company’s needs?
Because it can be a difficult decision for fintech companies, we’ve put together this guide to define financial data aggregation and to help identify the features to look for.
Understanding Financial Data Aggregation
Account aggregation, also known as financial data aggregation, is a process that collects a person’s financial data in one place. This data can include checking and savings accounts, transactions, investments, credit and tax data.
Having this data in one place benefits many parties, not only consumers. It also benefits banks, lenders, investors and financial advisors. A lender, for example, can use account aggregation to see all the relevant financial information for a consumer applying for a loan, including their transaction history, employment history, income, assets and more. Individuals and families can use the aggregated data to make better financial decisions and small and midsize businesses can use it to better run their operations or access critical capital. Fintech companies can use it to make better apps for their clients.
At Finicity, a Mastercard company, we believe that true empowerment of consumers comes from giving them full control of their data. Consumers should have total control over how their data is used, how frequently it’s accessed and how long it will be retained. The steps to manage data permissions should be easy, quick, and intuitive. Aggregators and ecosystem participants can work together to ensure the highest level of clarity and accessibility, making it easy for consumers to understand and manage their data permissions.
In addition to pure convenience, financial data aggregation through open banking eliminates the need for each party to update this data manually. This saves time and minimizes mistakes for both companies and their clients. It’s all part of open banking—allowing consumers, financial institutions, and third-party providers to access consumer-permissioned data for empowering consumers and small businesses through new and innovative financial services.
How does it work? Historically, data has been collected through screen scraping with a secure login. Much of today’s innovation has been built on the foundation of screen scraping. Recently, however, more data aggregators are using direct API connections with a financial institution. Finicity, for example, pulls the majority of its data through direct API connections in the United States. This method provides cleaner data and is more secure because it uses tokenized access instead of consumers’ login credentials.
Data aggregators use bank-level encryption, which safeguards the personal and financial data of consumers. Finicity operates its aggregation platform with a transparent, consumer-first ethos. Consumers should be explicitly informed in plain language how their data will be used and who will be using it.
What to Look For in Open Banking Providers of Financial Data
When you’re searching for financial data aggregation services, you’ll want to find one that has wide coverage, core provider capabilities and specialty products for your company’s needs. It should also maintain a good price point, with a user-friendly platform and the assurance of accurate data.
Does the aggregator have a wide breadth of access to financial institutions, or do you need a depth of coverage in one area? Finicity maintains its connections, which cover more than 95% of financial accounts. This means that anyone who uses our services can be confident that they will get the best possible insights into their client’s financial situation.
While there may be many companies that offer data aggregation solutions, many of them are simply reselling data from another aggregator. Finicity is one of a select few aggregators who maintain all of their connections to banks, credit unions and other financial institutions. When errors arise, you want to be dealing with the actual provider of the data, who can make changes. Otherwise, you may be consuming data they’re getting from somewhere else, and never have the ability to make essential adjustments.
You also want to know where your data is coming from for traceability purposes. Knowing how many different companies touch the data can also be an important piece of the puzzle.
Does the aggregator specialize in your industry? Whether you’re a lender, financial advisor, investor or private individual, it’s important that your financial data aggregation software be tailored to your company’s needs. For example, if you’re a lender, you’ll need to see assets, income, employment, cash flow, statements, transactions and scoring attributes to ensure that you are making the right decision. Where the data comes from is also important. Does the aggregator connect with the largest investment brokerages or stick to simply banks and credit unions? The source of the data is also an important component of an aggregator’s specialty.
What’s your budget? Where’s breakeven from a revenue and cost perspective? Many financial aggregation companies offer pricing on a tiered basis by volume, which may be something like free trial, pay-as-you-go or enterprise. Determine what your needs and priorities are—maybe you need verification of assets but not verification of income. See which tiers or packages offer your highest priority data and what your expected volumes would be.
Are the APIs readily available for you to use? If fintech companies can’t test out APIs before making a commitment, it’s hard to know if the features and user experience will fulfill their needs.
“The industry has been around for more than 20 years and technologies vary when it comes to working with a modern development team,” said Michael Deleon at Tearsheet. “You’ll want to find a match between your firm’s capabilities and the UI/UX of the data aggregation industry.”
Is the data they’re pulling cross-verified with multiple data sources and bank-validated deposit streams? You want to be confident in the quality of the data. That way you won’t have to do any further cleaning of the data and can plug what you receive directly into your current workflows.
Why Finicity is One of the Best Financial Data Aggregators
If you’re one of the many fintech companies looking for a financial data aggregator, Finicity is a great option for you. Tearsheet did a handy comparison, and if you’re here you’ve probably already heard about our competitors.
How does Finicity compare? No other data aggregator subjects their products to the FCRA, a statute that focuses on consumer rights and protection. Additionally, our data is battle-tested in the most rigorous lending market, mortgage, so you know you can count on its accuracy. We lead the way in coverage in the United States, with access to over 95% of financial accounts. Finally, our platform has deep data intelligence to deliver data in a smart way with the insights you need, whether you need it for payments, lending or helping your customers manage their money.
The best open banking platforms provide the vital links that allow fintechs and traditional financial services providers to continue building innovative products and services that enhance the customer experience.
- Data coverage and reliability – Finicity’s open banking platform provides direct API access so you don’t have to worry about connecting across different standards or connection types. Being the leader in direct data connections to financial institutions ensures the most reliable data direct from the data stewards (banks, payroll providers, wealth management firms, etc.).
- Data analytics and quality – The data you get out of those connections is tested daily and has been proven by the most stringent investors for its accuracy, usable insights and key data analysis. Finicity data is widely used for verifications, scoring, cash flow or other analytics.
- Trusted partner in innovation – An open banking platform should be your partner in innovation. Finicity provides the right data, from the best sources, over the best connections. This means you can rapidly integrate, innovate and move your products forward, staying ahead of the industry and your competitors.
We know that finding a data provider can be a daunting task. As you begin your search, request a demo of Finicity to see if it’s the right data aggregator for you. If you’d rather test out the technical side of things, check out our developer documentation.