Tech companies moving to create 'frictionless' experience so small businesses can get access to money quickly
Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Category Archives: Digital, NEO, Open Banking, Open Finance
Who needs banks? How tech companies are taking a bite out of financial services
Financial Post | | Aug 21, 2020
Tech companies moving to create 'frictionless' experience so small businesses can get access to money quickly
In early August, Montreal-based Lightspeed POS Inc. announced it would start offering loans of up to US$50,000 per retail location to merchants in the United States that already use its point-of-sale software. In the announcement, Lightspeed said merchants will, in most cases, get the funds deposited into their account one day after applying. The company’s customers tend to be mid-sized retailers such as jewelry stores and sporting goods retailers, not the big national chains, but bigger than an independent storefront.
Chief executive Dax Dasilva said such financing might be particularly good for buying inventory, or for launching a new marketing campaign, but he also expects that the speed of the loans could open up new opportunities that merchants haven’t been able to take advantage of before.
FFCON20 Video: Reducing Friction in Banking and Financial Transactions
“Let’s say you wanted to bring in a couple pallets of inventory that you knew would be successful, but the hassle of getting a small loan from the bank, all of that, maybe it’s something you don’t end up doing,” Dasilva said in an interview.
There’s a lot of buzz in the technology world about financial services. Apple Inc. now has a credit card that tightly integrates with an iPhone app, and its Apple Pay product. Uber Technologies Inc. issues a Visa debit card to drivers that is tied to a chequing account. Facebook Inc. has even tried to create its own money in the form of the Libra cryptocurrency.
"It’s very possible, that Every Company Will Be a Fintech Company," as Angela Strange, a general partner at the influential Silicon Valley venture-capital firm Andreessen Horowitz, headlined her blog post in January,
For one thing, it’s another line of revenue for the technology companies. In its most recent quarter, the company’s subscription revenue was US$196 million, but it took in another US$518 million from “merchant solutions,” which is mostly fees for payment processing and loans to merchants through the Shopify Capital lending product.
“Big companies don’t have problems with banking today, because banks are designed to serve big companies. But small companies do have problems: they can’t get access to money.”
Earlier this year, Shopify expanded its lending program to Canada and the United Kingdom, after introducing it in the United States in 2016. Shopify also offers a payment card to merchants, and the company makes a point-of-sale kit including a card reader. But Nejatian said Shopify isn’t trying to become a bank for merchants; it’s just trying to figure out all the services that a merchant needs to succeed.
“I think if all we do here is replicate a bank, we’ve failed miserably. That’s not the goal,” he said. “My goal is to help create the next million entrepreneurs and make it easier for them to launch, grow and succeed in running their business. Some of those things will be financial services, some of them won’t be.”
See: Is this the new face of Generation Z banking?
Wealthsimple is one company trying to build a competitor to the traditional banks.
“What you see a lot of companies trying to do — and we’re no different — is owning the client experience and deepening the client experience in all sorts of ways over time by removing friction,” he said.
“The banks are giant companies that have huge install bases of a lot of clients that aren’t going to go anywhere,” he said. “It’s a generational change. Banks have an opportunity to make those investments now. It’s not going to be easy, but it’s also going to require rethinking their business model, rethinking the way they make products.”
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Amex Acquires SoftBank-backed Kabbage After Tough 2020 for the SMB Lender
Techcrunch | Ingrid Lunden | Aug 17, 2020
Small and medium businesses have been some of the hardest hit in the coronavirus pandemic, and in many cases that has had a knock-on effect on the companies that provide services to them. Now, a startup that built a whole business around loaning money to SMBs has been acquired by a giant in the world of credit as the fintech industry begins to size up what the “new normal” will look like when it comes to doing business with smaller businesses.
Kabbage, which had built a platform that uses machine learning algorithms to assess and loan out money to small business owners, is getting gobbled up by American Express, the two companies announced today. Amex says it has “millions” of small business customers and the addition of Kabbage’s loan and other financial services tools signifies that it plans to double down on that sector with a much wider range of offerings.
See: Dealing with a crisis: FinTech versus Bank
The financial terms of the deal are not being disclosed, but reports earlier this month put the value of the acquisition at up to $850 million. For some context, Kabbage had raised nearly $990 billion in debt and equity (and at least $3.5 billion in securitizations), and was valued at over $1.2 billion in its last equity round of $250 million, in 2017, led by SoftBank.
The acquisition comes at a tricky time not just for SMBs but also the fintech companies that serve them, and specifically for Kabbage itself, with all of them weathering the storms of COVID-19.
Amex’s acquisition, tellingly, will include employees, technology and financial data, but “Kabbage’s pre-existing loan portfolio is not included in the purchase agreement,” Amex noted in its press release.
As for what happens with that loan portfolio, a spokesperson for Kabbage said there will be a separate entity that manages and services these loans at the time of close.
We don’t have a total amount of value for that loan book, but a spokesperson confirmed it includes not just loans that Kabbage had issued in its previous years of operation, but also loans made to SMBs in the U.S. under the Paycheck Protection Program. As of last week the latter totaled $7 billion across nearly 300,000 loans; and in 2019 Kabbage told TechCrunch it was on pace to loan out between $2.5 billion and $3 billion, so the pre-existing loan portfolio is not insignificant, and in current economic times, possibly one that comes with a lot of risk.
The news caps off an interesting run in the world of fintech that has seen Kabbage hit some significant ups and downs. The company attracted the attention of SoftBank and many other investors (and customers) on the back of a fast-growing business based around the idea of using artificial intelligence to speed up the process of small businesses applying for and subsequently getting loans.
See: Advisory experts back P2P lending sector to become mainstream investment class
Disrupting traditional banks and their slow and often frustrating approach to evaluating loan applications, Kabbage taps a wide variety of sources, from traditional accounting statements through to social media signals, into its proprietary machine learning algorithms, in order to determine eligibility for issuing loans, and the terms under which a business would pay it back. It was successful enough that Kabbage was also offering its product as a white-label service to other loan providers (including the banks it was disrupting).
“For several years, American Express has been expanding beyond our industry-leading commercial card products to offer our business customers a growing set of payment and working capital solutions,” said Anna Marrs, president of Global Commercial Services at American Express, in a statement.
“This acquisition accelerates our plans to offer U.S. small businesses an easy and efficient way to manage their payments and cash flow digitally in one place, which is more critical than ever in today’s environment. By bringing together Kabbage’s innovative technology and talented team with our broad distribution capabilities and over 60 years of experience backing small businesses, we can better help our customers successfully emerge from this challenging period and beyond.”
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Fintech Acquisitions Show Sector Strength Despite Covid-19
Forbes | | Jul 22, 2020
With Covid-19 continuing to rise, many in the fintech world have pondered what impact the virus will have. While the crisis may be causing a down round in terms of new funding in the space, it doesn’t seem to be slowing down mergers and acquisitions. The epidemic may not even register as a blip to future analysts of fintech M&A.
The second half of June saw the payments company Square acquire European peer-to-peer payments startup Verse, Mastercard acquire API provider Finicity, and Credit Sesame acquire the Canadian challenger bank Stack, to name a few. June also saw a surprising fintech IPO in Lemonade, the New York-based insurance startup. Lower profile but no less interesting was wealth startup Tegra118.
Led by Fiserv veteran Cheryl Nash, acquiring Illinois-based RetireUp. All of these acquisitions are interesting for different reasons and collectively tell a story of where fintech is likely going moving forward.
See: Global Survey on Impact of Covid-19 and Recession Risk: Fintech and Financial Institutions
Square has seen significant revenue gains from its lending arm, Square Capital, and its cryptocurrency-trading service was one of the first in the industry. Square’s move into bitcoin trading has since been widely imitated, most recently by PayPal, which competes with Square in a number of key areas. Square’s scooping up Verse, a P2P app based in Spain that offers a debit card and social features such as expense-splitting among groups, may signal a growing seriousness about competing in Europe.
Verse operates in 16 countries and as of last reporting in 2017, had 550,000 users. Square has faced stiff competition across the Atlantic from the likes of iZettle, acquired for $2.2 billion by PayPal in 2018. Fintech is a global business, but Square, compared to PayPal or Stripe, has been slow to expand internationally. Its card payment acceptance technology works in just a handful of countries outside the U.S., none of which are in continental Europe.
Square is worth keeping an eye on as its’ market cap of $55 billion made it—for a time, anyway—more valuable than Truist, the country’s sixth-largest retail bank.
Mastercard’s acquisition of Finicity was not surprising, given their press release highlighting their open banking strategy and the fact that Visa acquired Plaid in January of this year. The larger players in fintech have followed this pattern recently, as was seen with Fiserv’s $22 billion acquisition of First Data and FIS’s acquisition of WorldPay for $35 billion.
See: Seedrs Founder Jeff Lynn: We are experiencing meaningfully higher levels of fundraising and investment activity than the same time last year
Just as Plaid may do for Visa, Finicity can offer Mastercard deeper connections to customer bank accounts, as well as connect banks (Mastercard’s customers) with fintech companies (Finicity’s customers.) The move also gives Mastercard the capability to support customer choice.
Open banking enables consumers to allow access to their financial data to third party services, and is governed by regulations in many countries. The U.S. is not one of them, which makes large-scale efforts like Visa’s and Mastercard’s so important.
The Canadian challenger bank Stack, acquired by Credit Sesame on June 18, shows that the next generation of consumers and those in all age brackets continue to seek digital banking services.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Is Open Finance worth getting excited about, or is it just spin?
Sifted | Isabel Woodford | Jul 22, 2020
It's been a slow journey to get UK customers meaningful control of their bank data. Is the next phase of "open finance" the answer?
It’s a noble task to want to help users control, access and utilise their financial data better. The problem is, users aren’t convinced they want a third-party poking their nose into their data, or if it’s really of much use to them.
Here are their top four top takeaways about what it will take for open banking to take off, and why open finance is an important next step.
1) Success relies on building awareness
The panellists agreed that one key obstacle to open banking so far has been a trust-gap; fuelled by poor communication around user-benefits.
See: 3 examples of what open finance can do right now
Roisin Levine referenced research that still shows “very, very low percentages” of people say they’re willing to share their data in exchange for “more personalised services.” She said these vague concepts are unhelpful and apps need to “explain this stuff…don’t use these big, high-level generic terms.”
She recommended products leveraging open banking get more specific about the benefits to boost awareness.
“[We should ask]; do you want to ensure that the cash you have is in a high-interest account? Do you want to compare pricing on your insurance or… purchasing your energy? Then all of this stuff seems really common sense, and suddenly that applies to everyone.”
She added that trust in open banking is slowly “moving forward” and that seeing a value exchange is key in this respect.
“It’s kind of early days, but they will begin to get more and more used to it as time goes on.”
Another goal is to make open banking services so helpful that users don’t just want to use it; they want to pay for them. In particular, that might come from analytics tools currently being developed to give users intelligent insights into their future cash flow, for instance.
“Now I can see all [my accounts], but then you can show me what my actual cash flow is looking like in the next six months. What kind of decisions then can that drive?” Levine said.
2) The data is yours — but expect leaks
Another dilemma around open banking is uncertainty about what fintechs do with the data shared with them; again feeding into the trust question.
On the bright side, there are protections in place and limitations; overseen by the regulator. Users completely own their data and can revoke the access they give to third-parties at any time.
See: The Clearing House Releases Model Agreement For Sharing Financial Data
There are also restrictions on companies’ ability to sell the data directly to third-parties.
Instead, companies holding the data can monetise it by recommending new pension providers and taking a commission fee, for instance, or charging consumers for the service (like Monzo has done).
“What’s going to make or break the success longer term is ‘do you feel confident that you know where this data is going?'” Grose noted, highlighting the need to educate users on their data rights and companies’ use of their data.
Nonetheless, Levine warned that some companies might be tempted to charge a so-called ‘privacy premium’, whereby consumers get a worse deal or product based on their financial data.
“It only takes one kind of major loss of trust or issue that we find ourselves in a place where actually the whole industry is hurt, and we may be going backwards,” Levine said.
Meanwhile, Vans-Colina added there’s a big risk that open banking and finance data will get hacked and leaked.
See: New regime needed to take on tech giants
“I think that’s probably inevitable,” he warned. “But the regulatory framework in place is strong. And it means that only regulated companies are able to process and hold the data. And I think it’s a trade-off as a society we have to decide. Do we want to take this step?”
He also emphasised that open banking had big security perks overall, explaining that the amount of fraud and cybercrime will “go down massively because of open banking.”
3) A cross-generational project
Apps like Moneyhub — which aggregate users’ various bank accounts — have proven most popular with the over 55s.
Yet Grose is confident that open banking rules are already benefiting the younger audience too.
“I recently saw someone did a survey, and a lot of Gen Z would actually use a bank account inside of TikTok,” he said. “You’re going to see a lot of companies start to access and provide financial services using this type of [banking] data and they can meet different generations and different groups where they are already. I think that’s going to be incredibly valuable for people.”
Incidentally, Vans-Colina’s new startup, Fronted, will also use open banking tools to help young renters get cheaper deposit loans, by accessing their bank data and assessing their affordability.
See: Open Banking just got its own App Store
However, the inter-generational benefits may be less applicable to open finance. The fundamental benefit that open finance adds is being able to aggregate a wide array of different accounts and assets, which arguably millennials — the main audience of fintech apps — have less use for, given they generally have a smaller financial portfolio.
Still, Levine argues that pensions are important regardless of age, as well as is having a grasp on your investments and savings.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Hey bank, get onto my cloud!
The Finanser | Chris Skinner | July 21, 2020
I’ve seen a few big deals signed this month to get banks onto the cloud, such as National Australia Bank (NAB) switching to Microsoft’s Azure, and Deutsche Bank moving to the Google Cloud.
McKinsey expect that cloud usage will rise from less than a quarter of banks business being cloud-based to anything between 40 and 90 per cent of banks’ workloads globally moving to the cloud over the next decade. Bankers believe coronavirus will accelerate that shift dramatically which is why companies like IBM made a big announcement of renewed Cloud for Financial Services offer yesterday.
This is a development building on when Bank of America and IBM announced their collaborative efforts in creating the first public cloud specifically designed to address the requirements of financial services institutions late last year.
See: 4 Digital Transformation Lessons that Banks Need to Learn from Covid-19
Bank of America’s Cathy Bessant, Chief Operations and Technology Officer at Bank of America described the new partnership with IBM as “one of the most important collaborations in the financial services industry cloud space. This industry-first platform will allow Bank of America to use the public cloud, putting data security, resiliency, privacy and customer information safety needs at the forefront of decision making.”
Interesting.
There’s a number of interesting points here.
First and foremost is why didn’t they do this before? They didn’t do this before because it was too risky. They worried about security and how data in the cloud would be protected.
Second, why are they doing it now? Because of COVID19. Plain and simple, banks are being forced into the cloud because their staff are all stuck at home. Tough.
Third, why Google and Microsoft? Because everyone else is really busy. I spoke the other day to a leading cloud services provider, and they said: every bank is knocking on our door to move to our platform now, but we are too busy and told them to join the back of the queue? Cool.
However, in the press releases, the picture is different.
See:
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Fintech & Cybersecurity: Key Risks and Solutions
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Banking and the cloud: should banks adopt cloud computing solutions?
“For more than 150 years, Deutsche Bank has been an industry pioneer, with a strong record of innovation in the financial services sector,“ said Sundar Pichai, CEO of Google and Alphabet. “We’re excited about our strategic partnership and the opportunity for Google Cloud to be helpful to Deutsche Bank and its clients as they grow their business and shape the future of the financial services industry.”
This is the bank that’s worth less than half a Stripe, has completely lost its way, has taken serious body blows in the last decade and has a questionable future.
Nevertheless, the new Deutsche Bank leadership team is at least committed to technology and may see a way out. It announced a strategy in 2019 with a key line I use in all my presentations today:
At its heart, our technology strategy empowers our businesses to control “what” is produced, while technology has control of the “how”.
In other words, banking is what we do but technology is how we do it.
This is a critical statement and it encourages me that the new Deutsche Bank leadership team has finally got it.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Open Banking – North American Style
Fintech Talents | | Jul 14, 2020
Open Banking is taking shape in different ways across North America. From driving the development of new providers to enabling existing institutions to keep pace with a fast changing industry, the impact on financial services is significant. As the current crisis demonstrates, the swift change in the economic outlook and the situation of consumers and business alike, not to mention a rapid move to digital channels, the ability to understand, pivot and serve customers is so crucial and can be supported by open access to vital market data.
Open Banking is coming to North America but is taking shape in different ways across the continent. From driving the development of new providers to enabling existing institutions to keep pace with a changing industry, the impact on financial services will continue to grow in significance. That impact and the innovations that open banking initiatives support and catalyse, no doubt, will vary depending on the structure and regulatory framework of the financial services sector and the needs of economies/communities. It both opens the gateway to opportunity and flags challenges and jobs to be done.
See: Digital IDs Help Open Banking Reach Its Fullest Potential
Open Banking in the US differs greatly, for example, from the European approach which was propelled by technology trends and solidified through regulatory initiatives (PSD2, The Open Banking rules in the UK). There is no single regulatory framework in the US compelling existing institutions to share data through an open API standard and no broad-based accompanying rules protecting consumer data or mandating security standards. According to a 2018 report by the US Treasury, although there is a will to avoid fragmentation and remove regulatory/legal uncertainty, a mandated and coordinated approach is not supported or deemed feasible.
As the report notes, “There are significant differences between the United States and the United Kingdom with respect to the size, nature, and diversity of the financial services sector and regulatory mandates. Given those differences, an equivalent Open Banking regime for the U.S. market is not readily applicable.”
“While open finance in North America will not look like it does in the UK or Australia, the need for it here is not unique,” said Steve Boms, executive director of FDATA North America. “And with millions of families and small businesses struggling to keep afloat, there is no time to waste. Consumers will have improved access to capital, financial tools, and sound retirement options once they gain full control of their own data. North American economies simply will not be able to build back until open finance is a reality.”
See: 3 examples of what open finance can do right now
Open banking is coming to America but it will be driven by the private sector and State and Federal regulators will get involved as required rather than being in the driving seat. That may well be the American-way but market forces will continue to drive the adoption of Open Banking.
“The Financial Data Exchange (FDX) is a prime example of how the financial industry has come together rapidly around a common, interoperable and royalty-free API standard to make the open finance concept a reality regardless what type of regulatory framework may be in place,” said Don Cardinal, Managing Director of the Financial Data Exchange.
“FDX is a big tent with financial institutions, consumer groups, fintechs, financial data aggregators, payment networks, financial industry groups and other permissioned stakeholders of all sizes at the table and working to ensure that consumers have secure and reliable access to their own data,” added Cardinal.
New entrants will seek access to key troves of consumer data held by banks and other financial institutions and those very same institutions will need to keep pace with the rapidly evolving technological landscape and equally fast changing customer expectations and needs.
According to Alex Yang, Director, CashPro API and Global Open Banking Strategy Bank of America Merrill Lynch, “Absent the ‘letter’ of open banking, organizations like Afinis, SWIFT, and FDX have stepped in to help lead conversations on behalf of the North American corporations who seek access to commercial or retail data and services in the ‘spirit’ of collaboration and innovation. It is this spirit that will help improve the financial lives of businesses and consumers alike.”
See:
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Bridge to Recovery: The Bank’s COVID-19 Pandemic Response | Open Banking Consultations Delayed in Canada
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NCFA Open Letter: Government should collaborate with Fintechs
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FFCON20 RISE VIDEO: Jul 9 Senator Deacon Fireside Keynote with Sue Britton of FGS
Looking North and South from the large US market. Canada and Mexico are also seeking to create more competitive, responsive and inclusive financial services sectors through exploring/supporting government-led initiatives. The Department of Finance Canada established an Advisory Committee in 2018 and published an initial consultation into whether a UK Style approach should be adopted.
Further plans have been delayed due to the Covid-19 pandemic and progress has been stalled. Whilst the lack of a mandated open API may not block innovation, it may well make a concentrated banking sector slower to move and create barriers to faster innovation.
The current crisis is illustrative as the swift change in economic outlook and the situation of consumers and business alike, not to mention a rapid move to digital channels, further highlights the extent to which the ability to understand, pivot and serve customers is so crucial and can be supported by open access to vital market data.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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3 examples of what open finance can do right now
Yapily | Joe Terry | Jun 19, 2020
The average Briton's relationship with their bank lasts longer than their marriage - and this inertia can be costly. Banks have always been the one-stop shops for all things finance, but thanks to open finance that has changed.
Digital offerings in the financial services sector have changed the way we expect to interact with our banks and manage our finances. Gone are the days where switching is difficult, opening a new account takes weeks or applying for a loan means printing out bank statements.
Open finance is enabling a new wave of innovative financial services. The access to data made available by open banking connections is more versatile than originally imagined. The majority of sectors can now benefit from access to the API links created during the open banking era, meaning that customers can easily share their financial data. From mortgages and pensions to payment solutions, open finance encapsulates the idea of accessibility and removes barriers for banks, firms and consumers to interact more efficiently.
See: Open banking in Canada - Interview with Senator Deacon at FFCON20
How could open finance change the credit process?
Businesses could benefit from a new, more accessible way of accessing credit. Using open finance could increase efficiency as opposed to the traditional methods used when assessing a businesses loan or credit application. Choosing to use this option means businesses could share their financial data instantly, meaning the lender could:
- Carry out faster eligibility checks.
- Assess affordability and credit worthiness instantly.
- Gain immediate access to historical transaction data.
Businesses would in turn benefit from access to faster funds without laborious checks and waiting times. Open finance would transform credit assessments and could be automated, ensuring less human error, ultimately improving overall lending efficiency.
Open finance can solve the inefficiencies in money management.
How many finance apps do you have on your phone?
The odds are, if you have a credit card, more than one bank or accounting software on your phone, then you have a few different apps. Usually, all of the platforms or apps have different login details (you’re lucky if you only ever use face ID). It can be a nightmare, checking balances, transferring funds and managing accounts.
Open banking provides a secure and scalable method, whereby innovative firms can create money management apps that could collate all of your data in one place. Given the consumers consent, financial data from different accounts and financial institutions can be pulled together and be managed within one platform or app.
See: UK: Open Finance: The FCA Consults On How To Transform The Financial Services Market
Open finance enables the automation of financial management. Innovative firms could create platforms to enable applications to make financial decisions based on consumer information and preferences. A great example of this is moving money to the best interest rate available, maximising the return on savings and the opposite for debt, where moving debt to the lowest interest rate for overdrafts and credit cards could be automated.
Do you check and compare prices for utilities or insurance online?
Today's online comparison sites play a big role in what financial product customers end up purchasing. The quotes are usually generated by the user going through roughly 4 or 5 pages, typing in the relevant information to that product. Customers are then presented with many different quotes or estimates based on the information they have typed in.
Of course, typing in this information presents various challenges. Fraudulent entries being the most frequent. This may be in an attempt to reduce the cost of the product or service or it could be due to human error. However, comparison sites, pension providers, utility companies, insurers and more can utilise open banking data to see the real financial picture, automatically increasing effectiveness and reducing risk. The data made available through open banking could help simplify the process for firms and consumers.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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