Consumers
As users of fintech and financial services, consumers are in the driver's seat of the connected financial ecosystem. Their choices determine who wins and loses in the fintech industry. Fintech startups and financial institutions should carefully monitor consumer preferences so they can fill market gaps.
Consumers’ willingness to share their financial data with third-party apps is also critical for success. It’s up to fintechs and financial institutions to prove their trustworthiness through transparent policies and high standards for privacy and security.
Financial institutions that can connect to fintech apps have a growing competitive advantage. 75% of consumers agree that the ability to connect their bank accounts with digital finance apps and services is important to them.
Fintech apps and companies
In the connected financial ecosystem, fintech companies (also known as third-party providers) are defined as: “Non-bank providers that offer products or services which directly leverage customer data or other services consumed from account holding institutions. This may be based around APIs, bilateral connections, or through an intermediary.”
In other words, fintechs leverage bank account data—mainly through APIs, but also through other means—to make financial products and services more digital and accessible, and improve user experience. That could be anything from cryptocurrency trading to tools that help people pay off student loans to personal financial management apps. The possibilities are endless, and fintech companies are quick to fill the gap when a new consumer demand reveals itself.
Financial institutions
Financial institutions—and the core banking accounts they provide to consumers—have long been central to the fintech ecosystem. These banking platforms hold core account data such as balances and transactions, and are the primary accounts for payments and deposits. They provide the data fintechs can build off of or augment.
Most fintech apps are built by connecting with existing banks rather than displacing them—creating new ways of budgeting, investing, lending, paying, or any other conceivable financial service.
Data networks
Data networks are the lesser-known players in the financial ecosystem, but potentially the most important. They are the ‘glue’ that holds all these connections together.
There are thousands of fintech apps and services and tens of thousands of financial institutions, making it virtually impossible for developers to build 1:1 API connections between them all. Instead, fintech apps turn to data networks that have already built these connections. By connecting to a data network with pre-existing APIs with financial institutions, fintech apps instantly gain secure access to the latter’s accounts with the user’s permission.
Likewise, financial institutions can also rely on data networks to provide their customers access to fintech apps. By integrating with a reputable data network that fintech apps trust, they open up their customers’ bank accounts to any app connected to that data network—again, on the condition of user permission. Plaid is one such open API data network, providing connections between 8,500+ fintech apps and 12,000+ financial institutions.
Data networks can also share information about fraud between fintech companies and financial organizations, reducing the risk of fraud.
