To the average person, two financial standards organizations joining forces probably doesn’t register high on the interest meter. But in this case, it should.
The recent announcement that the Open Financial Exchange (OFX) is joining the Financial Data Exchange (FDX) will have a profound impact on the secure sharing of vast quantities of personal financial information—the hottest of hot topics today.
Recently, American Banker host Penny Crosman sat down with Olivier Helleboid, vice president of product and engineering for the Intuit Financial Data Platform organization, and Don Cardinal, managing director of FDX, to explore the implications of the OFX/FDX collaboration. Following are highlights from Crosman’s ”It should just work. Why banks need a single standard for data sharing” podcast.
Balancing access and security
The heart of the matter is data sharing. Consumers are understandably sensitive about sharing their personal financial information, especially in light of recent breaches that have compromised confidential records affecting millions of people. At the same time, authorized data sharing enables a wide range of personal finance applications that have transformed the way we manage our money and our lives, from money management tools such as Mint to cost-sharing tools such as Venmo. In fact, a recent study found that 63 percent of smartphone users have at least one financial app installed.
Ensuring the right balance of sharing and security is OFX’s raison d’être. About twenty years ago, developers of financial applications needed a way to access customer information securely, efficiently, and controlled by the end user, without having to develop a custom interface to each individual bank and financial institution. In response to this need, Intuit, Microsoft and CheckFree (now part of Fiserv) established OFX to create a data specification governing open transfers. More than 7,000 organizations have adopted OFX for exchanging a broad spectrum of personal information, from bank transactions and balances to tax information such as 1099s.
Next evolution of data sharing
Given the obvious effectiveness of OFX, why did we need another standard? “FDX is really just the next evolution of the marketplace,” says Cardinal. “We have guidelines for transparency, how to disclose to the consumer what data is being shared, with whom, for what purpose, and for how long.” The newer standard also spells out how consumer-permissioned financial data is securely shared and clarifies the security and authentication protocol requirements. On the technology side, FDX incorporates leading-edge features such as OpenID Connect, which helps assure the validity of financial information, and biometric authentication for enhanced security.
It didn’t take long for both organizations to see the benefits of collaborating. “By bringing together OFX and FDX, we can start leveraging all this work that’s been done over the years by OFX and the new technology standards in FDX,” says Helleboid. “We can broaden the scope of the FDX standard to include use cases such as tax preparation and account validation.”
While maintaining both standards, OFX and FDX are working together to maintain continuity for existing OFX users and to lay out a path toward a single interoperable industry standard for financial data sharing. As a founding partner of both groups, Intuit will play a pivotal role in the success of the venture. “This new alignment will help us drive toward a unified standard that will benefit consumers, financial institutions and fintech organizations around the world,” says Helleboid.
How banks—and consumers—benefit
There’s a lot at stake. The evolution of data sharing standards makes it easier for banks and financial institutions to innovate. “With this agreement, they can leverage the security and authentication work done by both groups,” says Helleboid. “They don’t have to redefine everything.” Ultimately, the consumer will be the winner. “We talk a lot about access and security, but it’s also about putting consumers in control of their own data,” says Cardinal. “We’re making data sharing clear and transparent.”
What does the future hold? Helleboid puts the OFX/FDX collaboration in a larger context. “Consumers have a lot of financial pressures, whether it’s about making more money, reducing their debt, or saving more for education,” he explains. “The ability to securely share data in a way that is visible and transparent will empower customers, enterprises, and small businesses to have a better financial life.”