Card Linking

Open banking for retirement: revolutionizing financial planning

Open banking is transforming the financial landscape, offering innovative solutions to help people save more effectively for retirement.

For many, retirement might sound like a faraway destination. However, putting aside enough for when the day comes is critical and many aren’t prepared. About half of Canadians polled say they're unprepared for retirement because they don’t have enough money left at the end of the month for savings. 

Thankfully, with advancements in financial technology products and services, approaching retirement finances is becoming more accessible for everyone. What makes these financial solutions so useful is the power of open banking to allow for consistent contributions. Open banking has emerged as a transformative force in the world of finance, offering individuals greater control and access to their financial data.

In this article, we will explore how open banking is expanding the landscape of retirement planning through open enrollment. Then, we will discover the power of everyday rounding and cashback rewards to help individuals plan for a comfortable future.  

The power of open banking and open enrollment 

Open banking is a system that allows people to share their financial data with third-party financial service providers securely and with consent. It is typically facilitated through Application Programming Interfaces (APIs) that connect banks and financial institutions with fintech companies, allowing them to access a wide range of financial data. Thanks to these open connections, open enrollment has become more effective than ever before. 

Open enrollment is the ability to link any type of card to a program with benefits that can help with your financial goals. Previously and still currently in many cases, only specific cards could be enrolled in programs - such as branded cards. However, open enrollment allows for any card to be enrolled and earn rewards.

Although many rewards can be earned through open enrollment, the two main ones that we will be focusing on are roundups and cashback. Why might this matter to individuals? Because roundups and cashback earned through open enrollment encourage individuals to save easily and consistently for their retirement. Even though roundups and cashback can be done without open enrollment, they're simply more effective through open enrollment. Open enrollment can link any card someone has in their wallet to a linked program. 

Rounding and saving for retirement

Planning for retirement is a financial journey that requires careful consideration, discipline, and often, a bit of creativity. One innovative tool gaining popularity in recent years is the "roundup" feature once a card is enrolled, based on a set of customizable and pre-set rules, individuals can automatically round up their daily purchases.  How does rounding work? For a quick overview, let's take a look at a real-world example. If a person spent $3.50 on a coffee, the roundup feature would round up the purchase amount to $4.00. The extra $0.50 would be taken and “set aside” towards a defined destination - such as a retirement savings fund. Simple everyday purchases like this can be crucial to saving for retirement. 

Because it’s automatic and because the roundup amounts are small with every transaction, the process feels easier to the individual. Some don’t even notice it. Yet, this seemingly small change in your financial habits can yield significant benefits for your retirement savings. In short, Roundups can help those struggling to find additional funds to build a more secure retirement nest egg.

Cashback cashforward and retirement

While open enrollment can empower rounding and saving programs, it can also be a major boon for cashback rewards programs. Usually, cashback reward programs require specific cards issued by retailers, to earn those rewards. However, with open enrollment, customers can earn rewards offered by retailers with their primary credit card. Just enroll, and start earning cashback once an eligible purchase is made. 

Retailers can set up loyalty programs and offer cashback as rewards for purchases made in their stores.  Imagine customers being able to enroll into this cashback reward program without having to be issued a new card, simply with an existing primary card. Now imagine that the signup and onboarding process takes less than one minute. This capability has immense potential for increasing customer acquisition, retention and satisfaction. 

Cashback rewards can also be cash-forward rewards, and like rounding, this too can have a significant impact on those struggling to save. Cashback rewards can be automatically funneled into retirement savings plans. Coupled with rounding, anyone can see an uptick in how much they’re able to save every month - without needing a new card or a change in purchase behavior. 

The power of consistency

One of the greatest challenges in retirement planning is consistency. It's easy to get overwhelmed or procrastinate when thinking about saving for retirement. Roundups address this issue by making saving an automatic and painless process. Every time someone makes a purchase, they are saving a little bit without even thinking about it. 

Over time, these small contributions add up. Ideally, individuals would want this money to grow in an investment account. With open enrollment, individuals can get started with the program of their choice with an existing card - no need to sign up for a new card, no need to wait for that card, and no need to switch over to this new card.

Open enrollment, rounding and cashback become practical and powerful tools for money managers to help their investors add extra funds into their investment accounts. Although the rounded amounts may seem small, over time with the power of compounding interest, roundups can turn into a meaningful amount of money that will help investors reach retirement goals. 

Interested to get started?

Olive brings these open banking and open enrollment solutions to life. Olive's open enrollment solution connects any Visa and Mastercard with seamless integration and onboarding. Olive brings open enrollment solution to life with our embedded finance platform that’s able to onboard any Visa and Mastercard for saving and investing programs.

Click here to schedule a chat with an Olive expert.

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