North America – Open Banking Use Cases

Plaid: Open Banking Powers Consumer Choice and Flexibility in Money Management

Open banking is transforming how consumers manage their finances by offering unparalleled choice and flexibility. With the CFPB’s forthcoming 1033 rule, these benefits are poised to extend to all consumers, ensuring they can securely connect their financial data no matter where they bank or which financial app they prefer. Companies like Plaid are at the forefront of this movement, enabling secure, seamless connections between financial institutions and the apps consumers rely on daily.

Today, 8 in 10 consumers use a fintech or digital finance app or service, highlighting the growing reliance on these platforms. Nearly half of these users engage with 3-4 fintech apps, with payment services leading the charge. What’s more, 20% of consumers anticipate using 6 or more fintech apps in the next six months, demonstrating a clear trend toward diverse and personalized financial management.

Connectivity stands at the heart of this ecosystem, and Plaid plays a crucial role in making this possible. A significant 63% of consumers say they would consider switching banks if their primary bank failed to connect with other financial apps. This figure marks a 12% increase since 2020, underscoring the critical role that seamless connectivity plays in maintaining customer loyalty.

As open banking continues to evolve, its ability to empower consumers with more choices and greater control over their finances remains at the forefront. The CFPB’s 1033 rule can play a pivotal role in reaffirming these benefits, ensuring that consumers can freely and securely access the financial services that best meet their needs.

Propel: Empowering Low-Income Households Through Open Banking

Open banking is a powerful tool for improving financial health, especially for low-income households that rely on public benefits. With the CFPB’s forthcoming 1033 rule, companies like Propel are poised to make a significant impact by providing easier access to financial data, helping households manage their limited resources more effectively, and protecting against benefits theft.

Improving Financial Health for Low-Income Households

For many low-income households, budgeting and planning are daily challenges, particularly when using EBT accounts for public benefits. These accounts, much like low-dollar bank and debit card accounts, are often spent down to $0 each month. With such thin financial margins, it’s essential for these households to know their account balances to the penny and to the minute. Propel’s services, which could be further enhanced by the CFPB’s 1033 rule, make this possible by giving consumers easier access to their own financial data. This empowerment allows households to better budget, plan, and stretch their benefits, ensuring that every dollar is accounted for and utilized effectively.

Detecting EBT or Benefits Theft

In addition to helping with budgeting, Propel’s platform plays a crucial role in safeguarding low-income households from the growing threat of EBT fraud and public benefits theft. Unlike credit card holders, who benefit from banks monitoring suspicious activity, EBT cardholders are often left to fend for themselves. Propel’s tools, combined with the expanded data access that the CFPB’s 1033 rule would provide, empower these households with access to detailed historical data. This data is critical for identifying out-of-state or unrecognized transactions, which are often indicators of fraudulent activity. As EBT fraud has become increasingly prevalent over the past two years, the need for reliable electronic data access to identify and address fraudulent transactions has never been more urgent.

Looking Ahead: The Role of the CFPB’s 1033 Rule

As the CFPB moves forward with its 1033 rule, the potential to enhance financial security and health for low-income households grows. Propel’s use cases demonstrate how critical access to financial data is for these vulnerable populations. By ensuring that all consumers, including those with EBT accounts, have the tools they need to manage their money and protect themselves from fraud, the CFPB can help create a more equitable financial landscape.

ByAllAccounts: How Open Banking Enhances Wealth Management

Open banking is revolutionizing the wealth management industry by providing greater access to financial data, which empowers both investors and their advisors. ByAllAccounts is at the forefront of this transformation, leveraging open banking to enhance investor insights, support fiduciary responsibilities, and streamline compliance of suitability performance reporting requirements. With the CFPB’s 1033 rule on the horizon, these benefits have the potential to become even more accessible across the financial ecosystem once investment data is included.

Investor Insights: A Clearer View of Investments

For investors (and their advisor), having a comprehensive understanding of the performance and composition of their investments and retirement programs is crucial for making informed decisions. ByAllAccounts enables this by aggregating data from various financial accounts, providing a unified view of an investor’s portfolio. This clarity allows investors to track their financial goals more effectively, ensuring their investment strategies remain aligned with their long-term objectives.

Fiduciary Enhancement: Supporting Advisors in Their Roles

Advisors play a critical role in managing their clients’ financial wellbeing, and open banking will enhance their ability to fulfill this responsibility. ByAllAccounts equips advisors with essential data, allowing them to gain a deeper understanding of their clients’ financial situations. This data-driven approach not only strengthens the advisor-client relationship but also helps advisors meet their fiduciary obligations by making well-informed, client-centric decisions. By having a holistic view of their clients’ assets, advisors can offer more personalized and effective advice.

Suitability Compliance: Simplifying Regulatory Adherence

Compliance with suitability rules is a key aspect of wealth management, ensuring that investment recommendations align with a client’s financial profile and regulatory standards. ByAllAccounts simplifies this process by providing access to detailed financial data, making it easier for advisors to verify that their investment strategies are suitable for each client. This streamlined approach to compliance not only protects clients but also reduces the administrative burden on advisors, allowing them to focus more on their clients’ needs.

The Future of Wealth Management with Open Banking

As the CFPB prepares to implement the 1033 rule, the potential for open banking to enhance wealth management is becoming increasingly apparent. ByAllAccounts exemplifies how access to financial data can empower both investors and advisors, leading to better financial outcomes and stronger client relationships. With open banking, the wealth management industry can become more transparent, efficient, and client-focused, benefiting all stakeholders involved.

Betterment: How Open Banking Enhances Goal Projections and Risk Analysis

As a leading digital investment advisor, Betterment leverages open banking to provide clients with more accurate financial guidance. Here’s how open banking can further enhance the services Betterment offers:

Enhanced Goal Projections:

Betterment offers savings and withdrawal advice by projecting returns and volatility for assets in client accounts. With the help of Plaid, clients can link external accounts—like investing, cryptocurrency, checking, and savings accounts—to their financial goals. These linked accounts allow Betterment to deliver a more comprehensive view of whether clients are on track to meet their goals. As open banking expands through policies like the CFPB’s 1033 rule, linking external accounts will become even easier, leading to more precise and personalized financial advice.

Improved Risk Analysis:

Betterment also provides advice on asset allocation and risk management tailored to client goals. By analyzing the risk levels of both Betterment and linked external accounts, clients receive feedback on whether their risk exposure aligns with their financial objectives, such as retirement or emergency funds. Open banking will further refine Betterment’s risk analysis by enabling access to more detailed and reliable information from clients’ external accounts, ensuring that investment strategies are well-informed and appropriately balanced.

As open banking continues to evolve, Betterment remains committed to offering clients enhanced financial insights and more accurate, data-driven advice, empowering them to achieve their financial goals with confidence.