financial inclusion open banking data

A 2019 study from the University of St. Andrews School of Management gave financial management apps to participants and measured how having those apps affected the participants as compared to a control group. At the end of the study, the proportion of those who were confident about loan repayments to those who weren’t was 17.2 percent higher in the test group than in the control group. With a little information and guidance, the participants became more confident about their finances—and that is key to financial inclusion. 

Financial inclusion improves when consumers have access to and control over their personal financial data. At Finicity, our open banking platform puts consumers in control of their data, which in turn leads to better financial literacy, inclusion, and outcomes. 

Let’s take a look at how access and control improve financial inclusion, giving consumers better opportunities to make and reach their financial goals.

Access through Open Banking

In the past, and even still today, consumers’ access to their financial data has largely been limited to monthly paper or PDF statements. But recent innovations have improved consumer access, allowing consumers “to access and consolidate statements electronically and to better understand their financial situation through personal financial management and budgeting tools.”

How does this increased access help consumers? With data and fintech apps and services at their fingertips, consumers become more financially literate. It’s a simple equation: knowledge plus basic skills plus financial motivation equals better financial behaviors.

In the same University of St. Andrews study cited above, the authors found that using fintech apps was a gamechanger for the participants: “[The participants] expressed greater confidence in their understanding of loan repayments and demonstrated improved financial literacy…. Those receiving the smartphone apps proved more resilient when subject to a financial shock and were more likely to keep track of their income and expenditure.”

To help improve financial inclusion, financial institutions can give consumers access to their data through open banking connections and provide fintech apps that help consumers become more financially literate. The standard to aim for is “account ownership equals data ownership.” 

What does this look like in practice? It looks like consumers being able to give third-parties permission to access their financial data on their behalf. It looks like the ability to see and access their data easily within their financial institution’s web portal. It looks like consumers reaping the benefits of big data on an individual and household basis.

Financial inclusion improves when consumers have access to their financial data in standardized, meaningful ways. That way, “individuals and families across the socioeconomic spectrum [have] access to financial tools once reserved for the wealthy. Whether it’s personal financial management tools, the ability to contribute data to credit scoring, or participating in peer-to-peer payment platforms, access to personal financial data changes lives.”

Control through Consumer-Permissioned Data

Once consumers have access to their data, control is the next crucial ingredient for financial inclusion. Historically, consumers haven’t had much control over how their data is used, who has access to their data, how frequently their data is accessed, or how long their data is retained. Without control, access doesn’t mean much.

Today, consumers have more control over their data than ever. Consumers are now able to “opt-in” their financial data, which can help streamline the loan-application process, give them access to better loan terms, and improve their generic credit scores. This level of control is possible through OAuth connections that provide tokenized access so consumers can permission and revoke these tokens at any time from the financial institution. Tokens also keep account details with the financial institution enhancing security and lowering risk.

With this relatively high level of control, what should be next to improve financial inclusion? Informed consent is a good place to start. Consumers need to have intuitive navigation experiences using language that is easy to understand. It’s not informed consent if consumers don’t understand the information! 

To make informed consent possible, financial institutions should provide a standardized permissions interface. Consumers should be able “to easily view, modify, add, and revoke permissions across their library of financial services. When permissions are buried out of reach, consumers do not have the control they deserve. Power only exists when control can be exercised and managed.”

Access and Control in Practice

At Finicity, we aim to help financial institutions and consumers improve financial inclusion through consumer access and control. To improve consumers’ access to and control over their financial data, we’ve connected financial institutions and payroll providers via financial data APIs, enabling consumers to permission their data for use in third-party applications or solutions. 

For example, our Finicity Lendsolution gives consumers and lenders access to the following data:

  • Assets
  • Income
  • Employment
  • Cash flow
  • Transactions
  • Statements 
  • Scoring attributes

This data can be used for everything from personal loans to small business loans. It’s real-time data that consumers can grant third parties access to in order to speed up the loan process. Its usefulness doesn’t end there, though. This data can also be used in just about any financial app, from budgeting to accounting to investments to account initiation and payments. The data is also FCRA-compliant so consumers can see the data used and dispute any inaccuracies.

Apps and services like these help improve financial inclusion. As the University of St. Andrews study found, people with access to this kind of information experience

  • improved “financial knowledge, understanding and basic skills,”
  • a greater likelihood to plan for the future,
  • a “greater sense of self-efficacy and a greater confidence in their ability to improve financial decision-making through engaging with technology,” and
  • “better financially capable behaviours.”

Financial inclusion improves when consumers have access to and control over their personal financial data. Access and control allow consumers to be full participants in their financial journeys, giving them the best chance to make and reach their financial goals. To learn more about financial inclusion, read the first blog in our financial inclusion series, “Improving Financial Inclusion: Cash Flow Analytics.”