Open Banking

Using open banking and embedded finance for financial empowerment

Open banking and embedded finance have the potential to bring real value-add solutions to people's lives. How can we make it a reality?

In general, technology has always been created and iterated to improve people’s lives in some way. Fintech is no exception. Over the past few years, we’ve seen a surge in fintech that aims to help increase financial wellness, include more demographics in wealth-building exercises like saving and investing, and making consistent goal-contribution easier and simpler than ever before. 

Companies like Mint and Goodbudget have emerged to help individuals with budgeting and keeping track of short, medium and long term goals. Yet, time and again, users churn out of these apps. 

Within the customer experience, there’s still a missing piece, a piece that can be provided by open banking and embedded finance. 

In this article, we will explore how open banking and embedded finance can be harnessed to empower individuals, improve accessibility, and revolutionize the way we approach our financial aspirations.

Financial data of the people, for the people

Much has been written about the pros and cons of open banking - with the major con of open banking being its massive failure in marketing itself. The word ‘open’ conjures a wild west of data insecurity. In actuality, the ‘open’ part of open banking refers to the ownership change of financial data. In particular, it will transfer ownership from the banks to the individual. 

What will individuals do with their own data? They can decide to grant access to it to other banks that they use and get a full scope of their bank accounts. They can let mortgage providers access it when deciding on loan terms and bypass weeks of paperwork. They can let fintechs access it in order to create budgeting apps and programs that are more accurate, more personalized and a lot more valuable. And by access, we mean high levels of security and encryption. Data is not running amuck “openly”. 

Embedded finance is somewhat related to open banking but is not the same concept. Embedded finance refers to a number of services that are financial in nature, but found in non-financial settings. For example, when customers buy a plane ticket and check out, they may see an option to add insurance to their travels for $45 or so. The airline or travel provider is not a financial institution, but with embedded finance, they are able to offer a financial product, like insurance. 

Open banking and embedded finance can come together in a union where the individual owns their data and can access financial services and products pretty much anywhere. 

What does this look like? Let’s take a look at two particular situations:

Opening up the possibilities of loyalty programs

Previously, loyalty programs were exclusive to specific cards issued by banks. With the advent of open banking, this is no longer the case. We now have the power to democratize access to these programs. 

Brands, organizations, and charities can participate alongside banks in running loyalty programs. Open banking allows anyone to enroll in programs like Air Miles, irrespective of their specific cards. By utilizing open banking information, companies can make loyalty programs more accessible to the average person, enabling them to utilize their benefits and work towards their financial goals.

Gaining better outcomes with the same behavior

Embedded finance is a game-changer that empowers individuals to reach their financial goals without requiring significant changes to their purchasing behavior. By seamlessly integrating financial services into everyday transactions, embedded finance allows individuals to harness the full potential of their existing cards. Imagine maximizing the benefits of various loyalty programs without the inconvenience of carrying multiple cards or altering your shopping habits. 

Rounding is a particular favorite situation of ours. When customers enable rounding on their cards, they are able to start saving, investing and donating without having to majorly shift their behavior. On average, we’ve found that with rounding, customers have an average of an additional $30 every month. That finding is with basic rounding alone, or rounding up to the nearest $1. The impact will be even greater with $2 or even $5. 

Embracing the future of financial goal-setting

Open banking and embedded finance are reshaping the financial landscape, empowering individuals to realize their financial goals. Through open banking, loyalty programs become accessible to all, transcending the limitations of specific cards and banks. Meanwhile, embedded finance enables individuals to leverage their existing cards without altering their purchase behavior, maximizing the benefits of loyalty programs effortlessly. By fostering strategic partnerships and embracing the future, we can drive widespread adoption and create a financial ecosystem that supports accessibility and empowerment. 

As we continue to bring open banking and embedded finance to life, the path to financial success becomes more attainable for individuals across the globe. This is directly tied to Olive’s mission, and is why we are determined to make these services accessible to all customer programs. 

To learn more about Olive and our programs, reach out to us here

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