As the open finance movement reshapes the financial services sector, F5 has been working closely with our customers and industry partners worldwide toward properly implementing and securing open finance-related APIs. An example of this effort is F5 being a participating member of the Financial Data Exchange (FDX), which is a non-profit organization made up of representatives from the largest financial services organizations in North America, focused on developing the FDX API standard as a common interoperable data standard. Key members of the F5 engineering team regularly attend FDX meetings, and they recently attended the FDX Global Summit Spring 2023 in Raleigh, N.C.
This article will feature key learnings from the event, including our engineers’ takeaways from some of our favorite sessions, including:
With FDX’s core principles circling around the security and reliability of financial data, the FDX Global Summit sessions did not disappoint. It’s clear that APIs continue to excel over other data-sharing technologies in evolving financial services ecosystems between financial institutions, third-party providers, aggregators, and customers.
The scope of APIs and how to ensure they are all secure came up in many sessions. Using the right security protocols to properly differentiate between bots and humans, along with authentication tooling, were popular areas of discussion. Specifically, how security profiles, like FAPI, fall in line with emerging and evolving compliance and regulatory initiatives continues to be a key focal point.
The many unique scenarios where open finance API security must be considered was one of our engineer’s key takeaways from the event. It’s easy to think of the most common situations of open finance, like how to properly secure P2P transactions, but there are many more to consider, especially as new FinTechs emerge. One area discussed was how mortgage banks can now better reach and serve the next generation of homeowners with modern applications. It was interesting to imagine the new security challenges, like ones associated with authentication, that might emerge in these high-value transactions. Certainly a different type of challenge for consumers from the traditional experience where their hand begins to cramp up from signing so many pages!
With our engineers being technologists in this ever-evolving cyberworld, it’s easy for them to get caught up in the architecture and tooling around open finance. There’s, no doubt, plenty to go through in this regard. At FDX Global Summit, this was certainly the case, but another key takeaway from one of our engineers was that open finance is not just about the tech. This was covered in one of the keynote sessions with Michael Hsu, titled Acting Comptroller of Currency. Specifically, the session reviewed the macro effects of allowing certain consumer behaviors at scale, and the associated overall impact on the health of the financial sector.
The example provided that piqued our engineer’s interest was the ease of account portability between wealth advisors. Many of us can certainly relate to the idea of switching mobile providers. I mean how easy is it to switch from Verizon to T-Mobile and keep your phone number? So, the question was raised in the session around why shouldn’t consumers be allowed to do something similar between wealth advisors?
The problem is related to the rapidity of switching and the burden that it can put on financial institutions. If loads of consumers removed their funds overnight via quick-switch account portability processes, it would put tremendous financial burden on an institution. An interesting point to consider for sure, as we all embark on these modern financial services offerings. Reminds me of one of my favorite movie quotes from the 1993 blockbuster Jurassic Park: “Your scientists were so preoccupied with whether or not they could that they didn't stop to think if they should.”
As open finance evolves, it presents an exciting opportunity for greater innovation and collaboration in the financial services industry. It’s great to have organizations like FDX for institutions and technology vendors to partner with and lead the way on API standards. Events like FDX Global Summit ultimately lead to more secure APIs, which provide consumers with the ability to consent to and permit secure fine-grained access by third parties to specific financial consumer data (e.g., balances, transactions) and functions (e.g., payments).
With new open finance API security challenges and regulations on the horizon, like the Personal Financial Data Rights announced last year by the CFPB in the U.S., there are major complexities coming down the pike for financial services organizations to consider. Regardless of what might be changing, there are many exciting driving forces behind open finance, like value added services from FinTechs to enhance our financial lives, including:
F5 partnered with the research analyst firm Twimbit to put together compelling global research around open finance. Check out this infographic to learn more about The State of Open Finance.