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The data-sharing routines undergirding a wide variety of payments services offered by fintechs like PayPal and Block depend on open banking, which has emerged to enable crucial information transfers from financial institutions while keeping sensitive account data from falling into the wrong hands.
Now the latest update to the rules behind open banking has arrived with the announcement late Thursday from the Financial Data Exchange that it is releasing version 6.0 of its application programming interface.
FDX’s update introduces so-called two-way notification of cases of fraud, which means these notices can now be two-way between data recipients like payments fintechs and data providers. Before, the flow ran only from recipient to provider.
Other updates include a so-called use case for account opening with either banks or nonbanks, and what FDX calls “the first data structures” for sending verification of employment and income data through the API.
The new API arrives as newer payments flows, including digital account-to-account transfers, rely increasingly on open banking. In October, for example, the payments provider Dwolla Inc. announced an integration that allows banks and third parties, such as open-banking platforms like Plaid Inc. and MX Technologies Inc., to share tokenized financial data for account-to-account payments.
The number of consumer accounts now embraced by FDX’s API totals 65 million across the U.S. and Canadian markets, FDX reported not long ago, a number that has doubled in the past 18 months.
The standards body releases an update twice a year, with the first version arriving in the spring of 2019. The API is widely seen as playing a crucial role in the rise of open-banking platforms and their ability to provide consumer account information to non-bank payments providers and other fintechs.
