In the Vast Financial Ocean, Rising Tides Lift All Ships

Former Intel executive David House once famously proclaimed an amended version of Moore’s Law, predicting that computer chip performance would double every 18 months. Regardless the accuracy of the statement, an industry standard was set as engineers at tech companies around the world pushed harder to gain a competitive edge over one another, and marketing departments constantly fretted over how to sell the new technology once it arrived. We upped the ante for scheduling innovation.

When a new technological solution does become available, there are often numerous versions, brands, types and more to choose from, before standardization is implemented to harness that solution for more widespread use by the public. We saw this to be true when Bluetooth standardized the way we connect our devices and when Blu-ray came out on top as the new standard for high-definition home entertainment viewing.

Right now, major players in the open financial web are working together to establish a standard for global banking connectivity. The open financial web is an ecosystem of traditional financial institutions, progressive financial app developers and data aggregators — the latter building APIs that serve as data hubs between the first two.

Companies in all three areas are working to make a global financial data sharing standard a reality, and there’s certainly no absence of demand for this. Consumers have come to increasingly rely on third-party financial apps that integrate with their bank. Financial management apps like YNAB, Level Money, Mvelopes and MoneyDesktop do a better job of helping customers manage their money than traditional bank portals, while payment apps like Venmo, PayPal and Google Wallet make certain payment use cases easier than traditional, bank-offered solutions.

Interestingly enough, banks are the original data aggregators. Years ago, they leveraged customer data to gain insight on their spending and saving habits. Such information wasn’t generally shared with third parties because there simply wasn’t a need for that. This was the era of the financial “walled garden.”

This financial walled garden of the past is being replaced by the aforementioned open financial web, where banks, aggregators and financial apps create an ecosystem of financial products for their joint customers. With the days of the walled garden behind us, banks that want to compete in the era of the open financial web must embrace aggregators and financial app providers to create a much broader solution set than financial services of the past. The name of the game here is “coopetition,” and establishing this standard for global banking connectivity will raise the bar for all parties involved.

The popular opinion right now is that the world of banking is ripe for disruption. While this is true, larger banks like Chase have been innovating for years, providing fintech products to make their customers’ lives easier. Truly, I believe we’re at a cross-roads where the industry is ripe for collaboration. An ecosystem of products and information sharing between banks, app developers and data aggregators will be to the benefit of all. In the vast financial ocean, rising tides lift all ships.


Steve Smith is the chairman, CEO and co-founder of Finicity, a leading financial data aggregator enabling innovation in the fintech industry through its modern RESTful API and Finicity Platform.

Written by Steve Smith