FDX Seeks to Make Open Banking More Accessible With Its Standard And API

While the recent partnership between fintech Wise US Inc., which specializes in cross-border payments, and Plaid Inc. is another example of the momentum open banking is gaining globally, one overlooked element of the deal is the role the open-banking standard developed by the Financial Data Exchange played in making the deal possible.

The free FDX standard/application programming interface, which is part of Plaid’s Core Exchange open-banking technology, is designed to move fintech and financial institutions away from so-called screen-scraping methods and toward API-based data sharing to access and verify financial data. At the same time, the standard eliminates the need for multiple connections to partner endpoints, which creates interoperability between fintechs and their partners. Fewer connections also reduce the risk of connectivity problems that can lead to data-gathering errors, observers say.

“The standard makes connectivity more plug-and-play, which allows fintechs to more easily onboard new players and focus on introducing new capabilities and  adding value rather than data formatting,” says Don Cardinal, managing director of FDX.

Last October, FDX introduced version 5.0 of its API, which increased market standardization of consent, user control, and consumer dashboards for financial-data sharing. Version 5.0 also aligns with other global open-banking standards, such as the Open ID Foundation’s financial-grade API security standard and the insurance industry’s ACORD annuity standards to promote greater interoperability and industry adoption. In June, FDX updated the API to improve formatting and enable greater ease of use.

“What we’re seeing is the blurring of lines between data providers and recipients,” Cardinal says. “With version 5.0 or higher of our API, users can onboard partners, assess risk around the transactions, and verify funds more quickly and reliably.”

As of July, FDX had 32 million consumer accounts using the FDX API, which first launched in spring 2019, to power open-banking applications.

In the the partnership between Wise and Plaid, use of the FDX standard allows Wise customers to securely move money across their own accounts by connecting their Wise U.S. dollar local account details in the app of their choice. Wise has more than 13 million customers. The Plaid network features more than 6,000 apps, including nine of the top 10 most-downloaded fintech apps in the Android + App Store as of May. Those apps include Venmo, Truebill, and Chime.

Wise customers are already leveraging the connection to the Plaid network for several types of financial transactions, including peer-to-peer payments. Business customers in the United States are using it to send funds to payroll companies, connect to neobanks, and pay credit card bills and taxes.

“Once the rails for data exchange are interoperable and secure, amazing things can happen because the barriers to the points of entry are lower, which fosters more innovation and competition,” Cardinal says.