May 2020 Summaries

The Financial Conduct Authority (FCA) has launched an industry consultation on Open Finance, which aims to extend open-banking type access to other sectors such as mortgages, insurance and pensions. The FCA is exploring how best to expand data access beyond open banking, but there is still much work to be done before Open Finance becomes a reality. Regulators should encourage competition by allowing firms that specialise in API development to compete on quality, rather than introducing a standard API. Additionally, the retrieval of data should be regulated, as currently, it is not, which limits the number of firms who can enter the market and provide innovative services. The process of expanding data access will likely take months or even years, and will require collaboration between sectors, providers, fintechs, and regulators.

Plaid is launching Plaid Exchange, an open finance platform that provides critical tools for financial institutions to manage secure and reliable data connectivity. The platform allows consumers to maintain control and transparency into where and how their financial information is permissioned and shared. With Plaid Exchange, financial institutions can bring an API solution to market in as little as 12 weeks, saving on costs associated with building tools and programs to manage developer testing, implementation, and risk management. The platform offers token-based API connectivity, infrastructure load optimization, and the ability to build one integration for open finance needs. It also aligns with key industry standards and principles, enabling new control tools for consumers. Plaid Exchange is designed to make it easier for financial institutions to incorporate APIs into their digital transformation agendas, regardless of budget size or resources.

Eric Sprauve is the manager of Plaid's Financial Identity team (FIT), which builds products that help consumers understand and use all their financial accounts. As a manager, his role entails people management, execution, culture-building, and recruiting. Due to COVID-19, social distancing has impacted his team by forcing them to work from home, but he is adapting by scheduling daily hangouts and standup meetings to maintain team cohesion and productivity. He believes that team culture and psychological safety are crucial for creativity and trust. His favorite Plaid Principle is "Think rigorously; act with urgency," which balances rigor and urgency when building unproven new products. Sprauve enjoys people, building new products, and the company's culture and mission, but also faces challenges in navigating an open landscape with no single right course to arrive at a goal. He has learned to reevaluate frequently and uses the phrase "necessity is the mother of all invention" to inform his actions.

The global banking sector is undergoing significant changes with the increasing demand for open banking systems, driven by consumer and government mandates. Different countries are approaching open banking in varying ways, with some using a market-driven approach and others taking a more prescriptive regulatory framework. The US, Canada, and Singapore focus on promoting data sharing frameworks without formal regimes, whereas the EU, UK, Mexico, and Australia have introduced prescriptive regulations to govern open banking. Despite challenges, such as licensing issues and limited data field availability under PSD2 in the EU, demand for open banking is growing globally. As regulators explore ways to enforce consumer data rights and industry groups push for standardization, the future of open banking remains uncertain, but it will likely continue to drive innovation in the global payments industry.

Open-banking-as-a-service refers to a third-party provider that combines access to payment account data with other value-added banking functionality, giving financial institutions a single solution to build upon. This service allows for the secure and easy connection to payment account data from various banks in the UK and Europe, enabling the provision of personalized financial products and services to consumers. With the authorization of the Financial Conduct Authority, Plaid is at the forefront of this new wave of innovative products aimed at putting consumers back at the heart of their finances.

In April 2020, Plaid introduced a free solution called SBA Verification to assist small businesses in sharing relevant payroll data with lenders for PPP loans and eligibility demonstration. Additionally, they launched Payment Initiation in the UK for easy account funding, purchases, and invoice payments through apps or websites. Updates were also made to iOS SDK v1.1.30 and Android SDK v1.3.0 with improvements in analytics and crash reporting.