The Key to the Future of Financial Services

Here’s why the collection and sharing of data is in a second—and far better—phase.

In today’s interconnected world, consumers want to be able to access information when, where, and how they want. Financial information is no exception.

Given its nature and importance, however, the sharing of financial data comes with a unique set of considerations for both consumers seeking convenience and better financial management and sources of data seeking to protect information from fraud, theft, and illegal use.

Our company, Fiserv, is in a unique position as both an aggregator of financial data, and a data source supporting the infrastructure of almost 4,000 banks and credit unions, a position that allows us to offer a holistic view of the current landscape for connectivity and aggregation, and what’s to come.

With that in mind, here’s a look at the state of data aggregation, and the move toward what we can call “data aggregation 2.0,” as we consider how this trend will play a key role in enabling the future of financial services.

A Powerful Tool

Data aggregation is financial data brought together—that is, aggregated, with consumer permission—from multiple sources, including banks and credit unions, credit card platforms, consumer bills, wealth and crypto platforms, and other data sources.

But aggregation does more than get data where consumers want it to go. It also makes that data a powerful tool that wealth, tech, fintech and financial institutions use to benefit consumers.

Initially, data aggregation enabled traditional personal financial management. We first saw it come to life in simple pie chart graphs breaking down investments in stocks and bonds into different categories. Those capabilities then evolved to show monthly savings, cash flow, progress against financial goals, debt management, and more.

While data aggregation made these personal financial-management features possible, they are now fairly common. Indeed, they have created the foundation for the next wave of opportunity—driven by data aggregation—to wash over the financial landscape.

Aggregation now enables the fulfillment of the open interactions that are the future of financial services. As it evolves, aggregation is no longer simply bringing information together in one place (aggregating). It’s now also transforming how financial institutions, tech platforms, apps, and consumers interact in singular activities such as targeted offers, payments, and lending.

In 2020, the spotlight fell on data aggregation with the announced, then scuttled, acquisition of Plaid by Visa and the announced, then closed, acquisition of Finicity by Mastercard. These industry movements signal the importance of data aggregation and connectivity, both of which will continue to grow and mature as the use cases for consumer-permissioned data sharing continue to expand.

The Consumer Financial Protection Bureau underscored this importance when it announced an advance notice of proposed rulemaking related to Section 1033 of the Dodd-Frank Act. The proposal aims to codify consumer rights to access financial records.

Direct Connections

Today, what’s driving the ongoing evolution of data aggregation is largely the growth of consumers’ interest. Consumers want to share data from their financial-services providers—often their bank or credit union—with an array of other financial providers that can use that data to create some form of opportunity for the consumer.

At the same time, consumers want to access and share their data when, where, and how they want. Enhanced data aggregation can drive fintech, business, and banking relationships when those expectations are met.

The industry’s march toward this new era of open banking will also lead to the decline of a historical method of data aggregation: “screen scraping” or “harvesting.”

Screen scraping can be inefficient, as it can burden the technical infrastructure of data sources. That, in turn, can slow Web site performance or hinder the mobile-app experience for consumers. It’s also often viewed as a less secure practice, as it relies on the sharing of usernames and passwords.

Many organizations are moving away from username-based screen scraping in favor of token-based direct connections that also offer more insight into who is accessing data and when, along with improved privacy and consent management for consumers.

The concept of what we can call Data Aggregation 2.0 has enabled, and also transformed, the ways consumers interact through technology, including the apps they have come to know and love. The basics of data aggregation have also given rise to new consumer empowerment in managing their finances.

And for technology and service providers, the ability to aggregate data gives them the insights they need to operate, make decisions, and better serve customers. This is especially critical for processes that require gathering large amounts of data, such as loan applications.

Exacting Criteria

The potential of Data Aggregation 2.0 and the connectivity it brings rely on two key facets: standardization of processes and robust security. In the best interest of all parties involved, data-management practices should be designed to protect consumers.

For that reason, organizations like Financial Data Exchange (FDX) and the Financial Data and Technology Association (FDATA) are at the forefront of bringing together industry leaders to advance standardization, security, and consumer consent, all of which will be necessary to further facilitate the sharing of financial data.

This movement is critical in part because payment and financial-services providers have exacting criteria for data aggregation. For VoPay, a digital-payments service provider that connects businesses to the banking and payment ecosystem, standardization and security come by partnering with an aggregator.

VoPay chose one that would verify contact information in support of broader Know Your Customer (KYC) and fraud-prevention purposes, verify funds before initiating EFT/ACH transfers, and confirm when a transaction has occurred.

The company also insisted on wide coverage of financial accounts, consistent data security and integrity, and quick and reliable data access for the best user experience.

Another example is FinLocker. Homeownership can be daunting for anyone, but especially for those in underserved communities. FinLocker, a personal finance-management tool, helps consumers of varying ages and incomes start, track, and complete their homeownership journey.

By partnering with an aggregator, FinLocker enables lenders within their network to incorporate financial data aggregation and personal financial-management tools into the loan-preparation process.

This lets consumers see and manage all of their financial information in one place so they can better prepare for their financial futures well in advance of a loan application. And it also improves the process for lenders.

Staying Ahead

At least once a week, I get a call or an email from someone with an aggregation or connectivity use case we haven’t seen yet. There’s so much potential beyond today’s data aggregation applications. That’s the future of Data Aggregation 2.0.

Data aggregation is experiencing very high growth across many use cases. The proficiency with which financial institutions, other data sources, and technology firms share data can determine how consumers view their solutions, while speed and convenience will remain key.

Working with a partner that can reliably aggregate data from the widest array of sources, with built-in adaptability and data security, will help organizations stay ahead—ultimately enhancing consumers’ experiences and earning their long-term loyalty.

—Paul Diegelman is vice president, aggregation and connectivity, at Fiserv Inc.