Financial service institutions often feel torn between “opening up” to new technologies and maintaining good security and compliance practices. But new standards are emerging to help them meet both goals.
The nonprofit standards organization Financial Data Exchange (FDX) late last month released a new application protocol with the goal of providing better two-way data sharing between data providers and third-party financial technology firms, as well as more consumer control of where data is shared. FDX is hoping to standardize financial data sharing as U.S. financial institutions continue to adopt open banking.
The latest release, the fifth version of the FDX API, promises to improve data-sharing around “consent, user control and consumer dashboards,” and to mesh with other security standards like OpenID Foundation and the insurance industry’s ACORD, per the recent release. “FDX API 5.0 represents FDX’s first major release since early 2020 and significantly expands the standardization of consumer data sharing in the financial industry,” said FDX Managing Director Don Cardinal, in a prepared statement. “FDX API 5.0 is not only increasing efficiency and ease of use across the open finance and open banking landscape, but we have made huge strides on global interoperability with this release.”
According to FDX, the new API is expected to improve the user experience with the financial services industry as well as third-party providers and data partners; to make user consent more standard and transparent throughout the financial data-sharing process; and to put these financial APIs more in line with Open ID, ACORD, and other globally recognized standards.
Gideon Taub, CEO of Pinkaloo, and vice president of emerging markets for RenPSG, said these changes “would provide two significant benefits.”
“First, it would reduce security risk by creating a standard and making it easier to confirm that only data that is absolutely required to be shared is actually shared, and that it is shared in a secure and compliant format,” said Taub. “Second, it will allow FinTech-FSI partnerships to be launched more quickly, as the required diligence reviews can be streamlined.”
Indeed, Dinesh Katyal, FDX’s director of product, echoed the concept that this latest iteration of the standard has drawn widespread support, in his prepared comment: “Almost every industry player involved in open finance and open banking data sharing in the U.S. and Canada is at the FDX table working to make FDX standards the absolute best in the world.”
FDX API 5.0 was created based on 43 “Request for Change” (RFC) proposals by FDX members. Additionally, FDX recently reported that 22 million consumer accounts are currently using the FDX API for financial data sharing in the U.S. and Canada. FDX releases updates to the FDX API twice a year with major updates delineated by whole version numbers.