FDATA member MX has been a leader in the open banking movement in North America with their approach to modern connectivity. In this interview, Chief Advocacy Officer Jane Barratt explains how the company has been on the front lines of promoting open baking to the public and policymakers.
Member Spotlight: Xero
Xero is a cloud-based accounting software platform for small businesses with more than 3 million subscribers globally. Through Xero, small businesses and their advisors have access to real-time financial data at anytime, anywhere, and on any device.
Founded in 2006, Xero is a global business, domiciled in New Zealand and listed on the Australian Securities Exchange (ASX: XRO). Our team of more than 3,600 employees is driven by our purpose to make life better for people in small businesses, their advisors, and communities around the world.
The relationships we have with our partners in the accounting and bookkeeping communities are part of what makes Xero unique. Xero’s platform allows accountants and bookkeepers to collaborate with their small business clients on a single, up-to-date general ledger and manage their finances, including invoicing, payroll, tax compliance, cash flow, and much more.
Xero has built a thriving ecosystem of over 1,000 connected apps and more than 300 connections to banks and financial service providers. With apps that support everything from inventory and logistics to point of sale and project management, the Xero App Marketplace empowers small businesses to build their own toolkit to run all aspects of their business and have them all work together seamlessly.
We are dedicated to building a socially conscious and environmentally sustainable business, benefitting the millions of customers we serve, their advisors, communities and the shareholders and employees of Xero. We are committed to reducing our impact on the environment. During the year ended 31 March 2021 (FY21), Xero was certified carbon neutral by the Australian Government’s Climate Active program.
Our commitment to gender diversity and inclusion was recognized with Xero’s inclusion in the 2022 Bloomberg Gender-Equality Index, which is the third consecutive year the company has been included.
Member Spotlight: TransUnion
TransUnion has been on the cutting edge of consumer data technology for more than half a century and is one of the world’s leading global information and insights companies. TransUnion serves consumers in more than 30 countries on five continents. In the United States alone, more than 166 million people have received free access to their credit information through TransUnion or its partners.
Information for good is TransUnion’s mission and the company is focused on using data to enhance financial inclusion. Helping individuals who too often have been left behind by traditional systems, the company’s alternative data assets can help create a more complete picture of a consumer’s risk profile. To date through trended and alternative financial data, TransUnion has helped 35 million credit invisible or credit-disadvantaged people gain greater access to credit. If scaled, the company estimates that the inclusion of alternative financial data could help an additional 60 million people gain access to credit.
TransUnion has long been an advocate for the use of alternative financial data. The company’s President & CEO, Chris Cartwright remarked “If alternative data is widely captured on credit reports and used by lenders in credit underwriting, the benefits would cascade across generations and all corners of America.” Because of that “more families would be able to flourish in the financial ecosystem, constructing legacies of prosperity they can pass along to their children,” he added.
As financial institutions look for new ways to support financial inclusion, TransUnion remains committed to doing their part to create a better future and more fair society. They recognize this important work is just beginning and their goal will be met once equity and credit access is an integral part of an economy where no American is left behind.
For more information on TransUnion, please visit www.transunion.com
Member Spotlight: Petal
Technology has changed the way people bank, invest, and manage their money. Petal takes a new approach to consumer credit, enabling customers to use their own bank account data – rather than a traditional credit report – to access safe and affordable financial products and services and to build credit, avoid debt, and spend responsibly.
Traditional banks often rely on outdated measures of creditworthiness, such as traditional bureau-based credit scores, in determining which consumers get approved for a new loan or line of credit. This approach has resulted in the tens of millions of Americans with thin or no credit files being unable to access financial products such as car loans, credit cards, or mortgages. To address this problem, Petal offers credit cards (issued by WebBank) to consumers based on “cash flow underwriting” – using a customer’s bank transaction history to evaluate their creditworthiness, examining income, savings, and spending patterns. The insights gained from cash flow underwriting have allowed Petal to expand access to the financial system to many American consumers who otherwise would not have received credit and enable these consumers to build credit profiles to help them access additional products and services. The majority of Petal members had little to no credit history when approved, and more than 40% were previously denied credit by a major bank or card issuer. Petal members with no prior credit history achieve an average credit score of 680 after just a few months of responsible use.
The Petal card goes beyond providing access to credit: it has numerous features designed to help members succeed financially. Petal’s Leap program provides a clear pathway for members to qualify for a credit limit increase, while also promoting responsible financial behavior. Customers enrolled in Petal’s Leap program that make six on-time monthly payments in a row and maintain a healthy credit score are guaranteed a credit limit increase. The Leap tab on Petal’s mobile app provides a convenient platform for customers to track their progress and includes customized suggestions for members to improve their financial health and build their credit profile. In addition, Petal distinguishes itself from other credit cards by encouraging customers to pay their full balance each month. Mainstream credit cards, meanwhile, often put consumers on a more expensive path by making “pay the minimum” the starting point. Petal members who cannot pay the full balance can use the Petal app’s payments calculator to easily understand exactly how much interest they will owe. Petal has also offered incentives, including a chance to win up to $500, to encourage members to pay more than the minimum on their monthly statement. Finally, to further encourage financial responsibility, Petal provides qualifying members with extra cash back on purchases – beyond the standard 1% – when they establish a history of making on-time monthly payments.
In April 2021, Petal launched Prism Data, a new company that enables banks, fintechs and other business customers to translate consumer-permissioned bank account data into useful insights and a CashScore that can help determine creditworthiness. By integrating Prism Data into their lending applications, users can improve their ability to reach consumers that have been left out of the mainstream financial system – particularly those who are credit invisible. Prism Data was founded on the belief that open banking and access to consumer-permissioned bank account transactional data will change the way consumer finance works. When announcing Prism Data, Jason Gross, Petal CEO and co-founder, said, “Prism Data is the next great step in furthering Petal’s original mission to democratize access to credit, now by empowering other organizations to serve more customers, build better products, and make smarter decisions.”
Petal’s success at reaching traditionally underserved consumers has demonstrated that open banking policies can help expand financial inclusion. In a June 2019 op-ed co-written with FDATA North America, Gross argued that bringing open banking to the United States could help policymakers address the fact that:
- 45 million Americans cannot access the modern credit system because of a lack of information in their credit report;
- 4 in 10 American adults don’t have savings necessary to cover a $400 emergency; and
- American consumers face up to $34 billion in overdraft fees annually.
For more information on Petal’s advocacy for open banking, you can read Petal’s written statement provided as part of the CFPB’s February 2020 symposium on consumer access to financial records, as well as Petal’s submitted comments to CFPB as part of the1033 rulemaking process and a Medium post by CEO Jason Gross published earlier this year titled “Your financial data belongs to you, not your bank.”
Member Spotlight: Morningstar
Morningstar empowers investor success by providing independent investment data, research, and analysis to investors of all kinds. This spirit of independence and transparency ignited in 1984, when Joe Mansueto left his job as a stock analyst. He realized that investors lacked the information they needed to make intelligent decisions about which investments best fit their plans. At the same time, he saw mutual funds growing in popularity as the tides were shifting away from company pensions to 401(k) plans. What was missing, he thought, was investment research for the average investor. Joe turned his idea into a new business with high aspirations—to help investors reach their financial goals.
Today, Morningstar provides data and research insights on a wide range of investment offerings, including managed investment products, publicly listed companies, private capital markets, debt securities, and real-time global market data. Morningstar also offers investment management services through its investment advisory subsidiaries, with approximately $260 billion in assets under advisement and management as of September 30, 2021. Morningstar is a global firm with operations in 29 countries.
Individual investors use Morningstar to make educated investment decisions. These investors want pertinent facts they can trust from an independent source, delivered in easy-to-understand formats. Financial advisors and other investment professionals turn to Morningstar for tools that help them research, analyze, present, and support their investment ideas. Morningstar’s research, analytics, and investment management services help advisors make more efficient use of their time and deliver better investment outcomes to clients.
The backbone of Morningstar’s independence and transparency is its commitment to research that illuminates investing. Recently published research available on www.morningstar.com includes:
- The “Morningstar Sustainable Investing Framework” provides the critical need for clarity in the rapidly growing environmental, social, and governance investing space.
- Morningstar’s behavioral science team recently published, “Drivers of Savings Inequality by Race and Place,” on factors that influence the differences in savings rates in American households.
- Newly published, “The State of Retirement Income,” reassesses safe withdrawal rates for retirees, finding that the standard rule of thumb should be lowered to 3.3% from 4%.
Morningstar® ByAllAccountsSM and FDATA
Morningstar ByAllAccounts is a data aggregator built to deliver high-quality, interoperable account data for the complex needs of the wealth management industry. It works closely with the FDATA Community and is the only aggregation provider that focuses exclusively on investors, advisors, and the enterprises who support them.
“At ByAllAccounts, the data we provide our customers is mission critical to powering holistic financial planning,” says Katy Gibson, head of product for Morningstar ByAllAccounts. “As such, we are big proponents of open banking because it gives us the ability to connect to reliable and secure data sources with minimal connectivity disruptions. As members of FDATA we will continue to advocate for the investment use case, ensuring the unique needs of investors and professionals that serve them are met.”
For more information on Morningstar and Morningstar ByAllAccounts, click here.
Member Spotlight: MX
Founded in 2010, MX helps organizations everywhere connect to consumers’ financial data to deliver intelligent and personalized money experiences. MX leads the industry with the most secure, reliable and direct API connections to the world’s top financial institutions using the most advanced AI and machine learning enhancement engine to categorize transaction data with 98 percent coverage. By connecting with 16,000 financial institutions and fintechs, MX provides the industry’s most reliable and secure data connectivity network reaching more than 200 million consumers worldwide.
MX has been a leader in the open banking movement in North America with their approach to modern connectivity. Chief Advocacy Officer, Jane Barratt, explained to Bankrate, “Open banking isn’t something that you only need once when you apply for a mortgage. It means you can use the data that you have, it’s yours, and [you can] share it with companies that can help you improve your financial health. Whether it’s access to cheaper forms of credit, use different money management tools or whether it’s to set up direct payments. There are [numerous things you can do to make] your money more automated and it is all based on data availability.”
With the launch of MXaccess, MX provides an open finance API platform for banks, credit unions, digital banks and digital banking providers. MXaccess improves the data sharing experience for customers by removing friction and frustration due to broken connections caused by screen scraping and provides a transparent and secure method to share data.
In addition to improving the data sharing experience for the financial industry’s ecosystem, Tearsheet recently honored MX with its Best Aggregator/Fintech Partnership Award for 2021. MX won the award for its work with FormFree, a technology company that improves lenders’ ability to make more informed decisions about borrowers and minimizes lenders’ risk via a seamless loan application experience for borrowers. By using MX’s modern connections, the average aggregation time for FormFree connections fell 89 percent, declining from an average of 3 minutes and 30 seconds to just 22 seconds. This improvement boosted FormFree’s revenue by 15 percent.
MX’s CEO Ryan Caldwell has made it clear that MX is on a mission to improve the financial ecosystem by increasing trust, managing risk and enabling the exchange of customer data to improve outcomes and financial health. Last year, Caldwell explained to KSL.com that 80 percent of the U.S. workforce lives paycheck to paycheck causing individuals and families to feel “real pain” and serious stress. MX is helping ease that pain by working with traditional financial institutions and fintechs to aggregate accounts and credit cards into one platform making it easier for individuals and families to make data-driven decisions and become financially strong.
Member Spotlight: Basis Theory
According to Government Technology magazine, there were more than 1,900 data breaches in the United States in 2020. In 2019 and 2020 alone, about 16 billion records were breached, and the average cost for a single breach is $7.7 million for companies with less than 500 employees. Breaches also grew in severity between 2019 and 2020.
At the same time, there are projected to be more than 25 billion internet-connected devices online by the end of this decade. That means more data. In fact, the quantity of data creation is expected to increase to more than 180 zettabytes over the next five years.
These numbers boggle the mind — and they put consumers, businesses, and policymakers on edge.
Enter Basis Theory.
Basis Theory has built a developer platform for encryption and tokenization that can accommodate any type of data (including sensitive payments data). The company, launched in 2021 and fully distributed, helps financial services and financial technology clients stay in complete control of their customer’s data without taking on the compliance burden. The company was built during the COVID-19 pandemic, when, overnight, consumers become even more reliant on technology to shop, order take out, see their doctor and, of course, bank. Over those months of isolation, founders Brian Billingsley, Colin Luce, and Ben Milne and their team of engineers “built a secure PCI-compliant foundation to enable the collection and storage of payments data” on the Basis Theory platform.
Milne has written that he, Billingsley, and Luce wanted to create a company that could “offer a product to developers globally to help make protecting data easier.” Why? As he explained, “In many cases it’s not just about securing data at rest in all of these devices but about enabling privacy for end users ensuring their data only goes to third parties who are capable of protecting it. That’s a trend [that] will continue until it’s solved by a company or a protocol, but more likely some combination of both.”
Basis Theory also helps its clients:
- Adhere to privacy regulations and comply with new and upcoming regulations, domestically and internationally, including PCI and the new Nacha rules;
- Optimize payments acceptance;
- Safely secure and manage user credentials and third-party API keys; and
- Secure any data, document, or image a client does not want stored in plaintext.
Basis Theory became a part of FDATA North American and the North American open banking movement to “ensure the safety, security and privacy of the continued proliferation of data sprawl and not let any associated concerns stifle innovation within financial services”.
FDATA North America and Canadian Lenders Association Call for Fintech Participation in Canada’s COVID-19 Response
FDATA North America and Canadian Lenders Association Call for Fintech Participation in Canada’s COVID-19 Response
Contact for FDATA North America: Kerrie Rushton, (202) 365-6338, [email protected]
ontact for CLA: Tal Schwartz, (514) 244-2008, [email protected]
April 24, 2020, Washington, DC and Toronto -The Financial Data and Technology Association (FDATA) North America today announced its endorsement of the Canadian Lenders Association (CLA) proposal to include financial technology (fintech) participation in Canada’s COVID-19-related financial relief programs for small and medium-sized enterprises (SMEs). While Canada’s Business Credit Availability Program (BCAP) should provide emergency loans over the next three months to up to 100,000 Canadian SMEs, FDATA North America and CLA jointly assert that many small enterprises will not be well served by the program as currently outlined.
Small businesses that could be left out include those that:
- Do not have existing relationships with traditional financial institutions who are overseeing the CEBA program;
- Have legitimate credit needs in excess of the $40,000 limit of the Canada Emergency Business Account (CEBA) program;
- Will not qualify for CEBA because their payroll is below $20,000 or in excess of $1.5 million;
- Will not qualify because workers/owners are paid through dividends rather than payroll; or,
- Will not qualify because key workers are contractors rather than employees on payroll.
The CLA proposal that FDATA North America has endorsed proposes to establish a special purpose funding vehicle through the Business Development Bank of Canada from which Canadian SMEs will access a target of $2 billion of funds within 90-120 days through CLA qualified fintech lenders. The program will provide necessary liquidity to small businesses that would not be able to access the BCAP through traditional financial institutions.
“The fintech community in Canada stands ready to assist the many SMEs that would be excluded from the BCAP,” said FDATA North America Executive Director Steve Boms. “Many have seen up to a 100 percent drop in their revenues which will continue for several months or more and face the prospect of a protracted economic recovery. While their long-term business prospects may remain sound, they need to survive through the short term. As some of the smallest SMEs in Canada do not have existing relationships with traditional financial institutions, it is imperative that fintech providers be authorized to participate in the BCAP.”
“Canadian fintechs have existing online systems and capabilities which allow them to efficiently originate, underwrite, and deploy BCAP loans,” said CLA’s President, Gary Schwartz. “Fintech lenders can provide significant operational support and leverage to the Business Development Bank of Canada and traditional lenders in deploying capital through their network of small business clients and will extend the reach of the existing BCAP.”
Other countries, including the United States, Australia, and the United Kingdom, have worked to include fintech offerings in their COVID-19-related small business loan programs. The U.S. Small Business Administration, for example, has in the past several days extended approvals to various non-bank lenders, including FDATA North America members, and is expected to approve further fintech applicants in the days ahead.
ABOUT FDATA NORTH AMERICA
FDATA was heavily involved in the UK Open Banking Working Group in 2015. In 2016, the working group’s output was published by Her Majesty’s Treasury as the Open Banking Standard. FDATA North America was founded in early 2018. Its members collectively provide tens of millions of consumers in Canada, the United States and Mexico with aggregation-based tools to better manage their finances. Existing FDATA North America members include: air (Alliance for Innovative Regulation), Betterment, Direct ID, Envestnet Yodlee, Fintech Growth Syndicate, Flinks, Intuit, Kabbage, Mogo, Morningstsar, M Science, MX, Petal, Plaid, Questrade, Quicken Loans, TransUnion, Trustly, VoPay, Wealthica and others.
ABOUT THE CANADIAN LENDERS ASSOCIATION
The Canadian Lenders Association’s mission is to provide its members the tools to innovate and grow and to foster safe and ethical lending practices. The CLA supports the growth of companies that are in the business of lending, or providing other means of credit, to small business and individuals by non-conventional or innovative means.
FDATA North America Statement on Department of Finance Canada Open Banking Report
FDATA North America Statement on Department of Finance Canada Open Banking Report
Contact: Kerrie Rushton, (202) 365-6338, [email protected]
January 31, 2020, Washington, DC – The Department of Finance Canada today released Consumer-Directed Finance: The Future of Financial Services, which is the result of more than nine months of consultation with stakeholders in the financial services and financial technology sectors. Financial Data and Technology Association (FDATA) of North America Executive Director Steve Boms issued the following statement upon release of the report:
“When announcing these consultations back in January, Finance Canada said Open Banking ‘could better serve consumers and grow businesses and markets, contributing to the growth of the Canadian economy.’ That absolutely is true and this report from the advisory committee makes that evident.
“Now we get to the ‘how.’ How can stakeholders work together to create a system that puts consumers in control while safeguarding their privacy and security and introduces competition into the market? We look forward to continuing to work with Finance Canada to create a system that empowers individuals, families, and small business owners to take control of their financial lives.
“As Finance Canada has made clear, creating an Open Banking regime is a must-do task for Canadian lawmakers. The private sector, however, does not have to wait to start implementing consumer-centric open banking technology and services. Financial institutions, including those currently restricting their customers’ ability to take advantage of third-party tools, like CIBC, the Bank of Montreal and Scotia Bank, should not wait until they are forced to comply with government demands to let consumers be in control of their own data. They should start doing so now.”
In addition to its consultations with Finance Canada, FDATA North America has published white papers for Canadian and U.S. policymakers that outline the benefits of Open Banking and provide policy and oversight recommendations for lawmakers and regulators. “Opportunities in Open Banking” for the United States is here. The Canadian paper is here. FDATA North America analysis on the report’s findings is here.
Department of Finance Canada’s Report on Consumer-Directed Finance: The Future of Financial Services
ABOUT FDATA NORTH AMERICA
FDATA was heavily involved in the UK Open Banking Working Group in 2015. In 2016, the working group’s output was published by Her Majesty’s Treasury as the Open Banking Standard. FDATA North America was founded in early 2018. Its members collectively provide tens of millions of consumers in Canada, the United States and Mexico with aggregation-based tools to better manage their finances. Existing FDATA North America members include: The Alliance for Innovative Regulation, Betterment, Direct ID, Envestnet Yodlee, Fintech Growth Syndicate, Flinks, Intuit, Kabbage, Mogo, Morningstsar, M Science, MX, Petal, Plaid, Questrade, Quicken Loans, TransUnion, Trustly, VoPay, Wealthica and others.