Editor, Author at Finicity

From baby boomers to Gen Z, each successive generation is more comfortable with using technology tools to manage every aspect of their daily lives. Gen Z (born 1997-2012) only knows a world that’s almost completely digital. It’s no surprise then, to find out that Mastercard’s Rise of Open Banking study showed that they were the most willing and eager to adopt cutting-edge fintech apps and services before older generations. Given that millennials have recently surpassed baby boomers as the most populous generation in the U.S. and Canada, sensitivity to their financial needs and desires is critical for fintech developers and entrepreneurs, as well as banking sector incumbents.

When asked about why you would use technology to manage finances, convenience is the top driver. The desire to try something new is motivation responsible for the biggest gap between younger and older generations. A full 28% of Gen Z and 33% of millennial consumers selected to try something new as the reason for using technology to manage finances. This compared to 21% of Gen X and 12% of boomers using technology because they wanted to try something new.

Gen Z and millenials are also far more responsive to social pressure from their peers to adopt new technologies. Twenty-two percent of Gen Z consumers and 21% of millenials react to social pressure by adopting technology to manage finances, while only 8% of Gen X and 4% of boomers feel compelled to do the same.

Having been born into a digital world, digital natives are unafraid to try a new payment app or digital lending service, just because it’s better than anything else available. They’re accustomed to the fast pace of technological development, and the accelerated life cycle of digital tools. Thirty percent of Gen Z and 34% of millennials have little hesitation to jump on board with newer, better offerings, as opposed to 23% of Gen X and 17% of boomers.

Next-Gen Use Cases Built to Serve Younger Generations

One of the newest, fastest-growing use cases powered by open banking is Buy Now, Pay Later. BNPL is essentially a riff on layaway payment plans, where consumers gradually paid off a piece of merchandise before taking it home. BNPL apps and services allow users to have the merchandise right away, but split payments up over a short period of time, in many cases at zero percent interest. BNPL usage grew an astounding 81.2% from 2020 to 2021, with nearly 75% of BNPL users in the Gen Z and millennial cohort. They’re far more willing to adopt these new fintech tools, while Gen X and baby boomers trust a branded card over new digital innovations.

Some BNPL lenders are using open banking and consumer-permissioned data points to look beyond FICO scores to qualify borrowers. This benefits consumers who have thin credit files, who can now establish a history of borrowing and repaying, without the traditional FICO barrier.

Young consumers are also loving the new wave of gamified digital banking experiences that open banking can enable. For a generation raised on video games, this is a natural fit. Gamification has been hugely successful in education, health and fitness, and is steadily growing in the finance sector. Through challenges where the user can compete against others, themselves, or even build a virtual world to entice smart financial moves, next-gen apps and services are catering to the tastes, desires and motivations of younger consumers.

Given that most of their daily lives take place on a mobile screen, it’s not surprising that Gen Z and millennials are far more likely to connect their bank accounts for digital payments. Recurring transactions like gym and streaming memberships, digital wallet top-ups, and even retail purchases are all use cases that young consumers are readily adopting to make direct digital payments.

Digital Banking Isn’t Trending, It’s the Future

Digital natives are driving innovation in the finance sector. A full 78% of millennials use mobile banking, and one-fourth of millennials now have their primary checking accounts in digital-only banks. Open banking platforms can empower these consumers to benefit from their data through a wide variety of third-party financial apps and services. These apps and services utilize that data to offer them the new money experiences they want in their financial lives.

As consumers adopt and demand more personalized digital tools to save time and money, and look to improve their financial outlook, our partners can leverage open banking solutions to drive stronger customer engagement and loyalty. Consumers should be at the center of the data experience, helping them feel more connected and in control.

Finicity’s Global Open Banking Platform is democratizing access to data, providing consumers with greater access to credit, payment choices, and convenient digital banking experiences. With their growing purchase power, this is what Gen Z and Millennial generations expect and demand, moving into the next evolution of financial apps and services.

To learn more about the use cases driving young consumers to fintech, read the full study here.

InstaMortgage, a tech-driven mortgage lender licensed in 26 states, today announced that it has adopted technology provided by Finicity, a Mastercard company, to help consumers make smarter financial decisions through its safe and secure access to fast, high-quality, consumer-permissioned data verification during the mortgage lending process.

Finicity’s Mortgage Verification Services offer a digital-first, low-friction mortgage lending experience that can cut days off the mortgage process and cut costs to both lenders and borrowers. To learn more about streamlining your lending workflow, click here.

Read the full announcement here.

In an interview with Insider Intelligence, Steve Smith unpacks why open banking is a valuable tool for consumers, fintechs, and incumbents alike—and where it’s headed next. He breaks down the regulatory landscape and identifies where regulators can take the baton from the industry to keep consumers safe. He also gives his take on why consumers have a hard time trusting fintechs with their financial data and the role that open banking and APIs more generally will play in web3.

Read the full interview here.

Buying a home in today’s market is challenging from start to finish for many consumers. Reduced supply, increased demand and competitive bidding wars riddle the path to homeownership. The struggle doesn’t end there, according to recent homebuyers who responded to Finicity’s 2021 Mortgage Survey, which is available now.

Many are still struggling with the decades-old headache of collecting mountains of paper documentation for underwriting. This antiquated holdover from a bygone era continues to add unnecessary stress and anxiety to processing, underwriting and closing a mortgage.

To get a better understanding of what borrowers are going through in this white-hot market, Finicity surveyed over 1,000 consumers who have purchased or refinanced a home in the last year and compiled the insights into High Demand, Higher Hurdles in the Mortgage Market, which details these pain points and provides a window into how the mortgage lending industry can evolve to meet the shifting needs of today’s homebuyers and refinancers.

Big Opportunities for Change in the Mortgage Process

Many consumers approach their home purchase with excitement and, understandably, a bit of trepidation. But while today’s homebuyer grits their way through a challenging shopping and bidding environment, any excitement can quickly turn to angst when they are met with a cumbersome and laborious mortgage loan process.

Refining the mortgage process means identifying and removing pain points for homebuyers. Our survey uncovered that 89% of borrowers believe the loan application experience was as stressful if not more than the home buying experience itself. Eliminating friction during the mortgage process is a critical step in building loyalty and meeting the expectations of today’s homebuyer.

Many homebuyers were surprised to learn that physical documents still make up a large portion of mortgage documentation. Seventy-two percent of respondents were surprised or very surprised at the volume of paper that’s still used during the mortgage process.

Going Digital Means Reduced Stress

The majority of today’s homebuyers are accustomed to navigating life digitally, and the mortgage experience should align with this.

Only 12% of respondents indicated that they were uncomfortable permissioning their personal financial data to a lender. Meeting consumers where they feel most comfortable helps save them time and reduces unnecessary stress.

Borrowers who used digital mortgage verifications were less likely to say the loan process was the most stressful part of buying or refinancing a home, and 83% of respondents using digital verifications said their loan processing time was shorter than expected or met their expectations.

Embracing Change

For many industries, the COVID-19 pandemic has been the catalyst to transition to digital solutions. While the mortgage industry has started down this path as well, there is still work to be done. Reducing friction through digitization of manual loan documentation and minimizing the document-chasing between lender and borrower is a key component of this transformation.

Consumer-permissioned data delivered through our open banking platform allows for digital verifications throughout the mortgage process, significantly reducing the time it takes to close. In today’s mortgage landscape, this can mean the difference between consumers stepping into their dream home after a quick, seamless loan process, or losing out to a buyer who is using digital lending for a quick close.

The complete findings are now available in Finicity’s most recent mortgage survey, High Demand, Higher Hurdles in the Mortgage Market.

Finicity, a Mastercard company and leader in open banking solutions, today released its new report High Demand, Higher Hurdles in the Mortgage Market. The report reveals key findings around the issues consumers face during the mortgage process and how digital solutions are starting to provide relief. According to the report, 89% of respondents find the loan application was more stressful or as stressful as the home-buying experience.

Consumer-permissioned open banking solutions allow for digital verifications throughout the mortgage process, shaving days off the entire experience.

Move Money With Confidence

We designed our platform behind a driving principle: Pay Confidently.

This means reliably fast data and superior, API-based connections with leading financial institutions. We layered in added intelligence and deep learning which can help to mitigate fraud while reducing payment failure and pesky NSF fees.

Each year, more of the world’s leading banks, fintechs, and payment platform providers deliver faster, more secure consumer payments with the power of open banking.

We look forward to seeing how you’ll use open banking capabilities to exceed your customers’ expectations.

Do you have a question about how open banking can improve payment enablement? Send us an email or download our PDF overview.

Ready to see open banking in action? Request a demo online.

Co-founder and former CEO of Finicity Steve Smith and other CEOs with experience across the global payments spectrum offer up their views on the current open banking landscape in the United States. Should U.S. policymakers and regulators take action to push it beyond market-driven moves, such as bilateral agreements between companies?

Open Banking Platforms Create a Real-Time Network of Connections to Financial Institutions

Trusted financial data aggregation platforms facilitate secure access to consumer-permissioned data via traditional connections (enriched with bank-level security) and APIs.
Tokenized access to account credentials is granted to third-party financial services innovators, utility providers and investment platforms, opening up consumer options.
Open banking is making third-party ACH payments faster and more secure, maximizing savings, rewards and investment opportunities.
A simple account balance check smooths the pre-funding path and protects consumers and merchants alike from failed payments and potential fees.

Using secure, consumer-permissioned access, financial institutions and vendors now get instant account balances and data from a consumer’s bank. Owner details, addresses, account and routing numbers and real-time balances are all immediately available. They can be scrutinized before authorizing payments on an open banking platform. Account access credentials are packaged into a “token” that can be passed to a third party. It yields no meaningful data if intercepted and hacked. This new level of security is spawning a much larger, more niche-oriented market of financial services providers and app developers. Open banking applications allow users to move money at the speed of the market.

Open Banking Opens Up Payment Enablement and Authentication

Innovation across all data-sharing stakeholders in the ecosystem expands what you can do to verify data and customize it to fit your payment use cases.
New technologies like AI are now available to integrate into your user experience. Move customers through your account setup process quickly and intuitively, while gaining permission to curated data that fits your needs.
Once an account is authenticated, payments from it can be issued instantly (dependent upon market/account providers) throughout your suite of products. Financial management, investment, utilities and recurring payments are all open for immediate money movement.

All of this has been revolutionary for consumers. Their mobile phones are full of financial services options powered by open banking, and they’re adopting them at a rapid pace. With a few taps on the screen, a user can grant permission to third-party apps and platforms, without having to type in account or routing numbers. The app or service the user wants to access is up and running with a full package of information pre-loaded. Secure, real-time ACH payments can be made within moments of installing and setting up an app. With the richer level of insight that’s available through consumer-permissioned data, developers are giving consumers a wealth of new options for managing, spending, and borrowing money. This is industry-changing innovation. It’s giving consumers more flexibility and ownership of their financial position than ever before.

Open Banking Simplifies the Payments Experience for Consumers

Customers aren’t asked to supply sensitive information, just permission to their accounts.
No more waiting periods for further verifications, like microdeposits or database checks. The customer’s data is pulled in milliseconds and rolled into the app they’re using, making real-time payments a breeze.
Financial management apps with AI integration pull together a holistic picture of the consumer’s moment-to-moment financial well-being.

While authenticating account details, ownership and current balance can streamline your payment process, it also reduces the hassle of setting up accounts and making payments for your customers. Enhancing their experience, especially when setting up payment is one of the first interactions they have with you.

Learn more about Finicity’s data solutions for verifying account details, account ownership, and check balances here.

How people pay bills, shop online, open accounts and experience their finances is evolving quickly. Fintech innovations are altering the way consumers think about and relate to money. The COVID-19 pandemic has only accelerated the digital transition. The shifting reality of how finances are managed is underway. Bank branches and paper checks are an afterthought to a growing number of consumers. Eight in 10 Americans are linking their bank accounts digitally, using these connections to automate everyday tasks like paying credit card and utility bills, according to Mastercard’s new study, The Rise of Open Banking.

The sea change in consumer expectations is already in motion. With every leap in speed, security, and ease of use, open banking apps and services usher in the next generation of finance. The advent of the internet has trained the human mind to process far more information than in the past, and to do it quickly. When it comes to their personal finances, people want the real-time data whenever they want it. Save them time and money, and enhance their financial health, or they won’t adopt your platform.

1. Saving More Time, Creating Less Work

Just a handful of years ago, a group of friends out to dinner would have to all reach into their wallets and purses, chip in cash, write a check or stack a pile of credit cards on top of the bill, and wait for the server to swipe them all. With the massive adoption and growth of P2P payment apps, these antiquated processes are quickly becoming a thing of the past.

In real time, payments can be split between friends with a few taps on the mobile screen. Digital wallets allow a busy shopper to tap their phone against a payment terminal and breeze through checkout at retail stores. Encrypted credit card info auto-populates, saving time and reducing user error when shopping online. The countless hours these new processes save is the biggest driver for adoption. 59% of study respondents cited this as their number one motivator.

2. Saving Money

65% of Americans don’t know how much money they spent last month. Saving doesn’t come naturally to many people, and our emotionally-charged relationship with money certainly doesn’t help. So much emphasis is placed on new and better ways to spend that saving becomes just a lurking afterthought. Open banking innovators are addressing this huge segment of consumers with a rich slate of apps and services. AI and machine-learning engines do the heavy lifting of savings calculation, goal-setting and projection, raising the level of users’ financial literacy. 42% of Americans surveyed wanted help saving their money, and trust technology to give them the advantage they need.

Open banking technology powers some of the most effective fintech apps for saving money, using artificial intelligence and machine learning to take a deep dive into spending habits and cash flow. Some even gamify finances, injecting the process with fun and some healthy self-competition.

3. Improving Financial Health

Open banking and AI make a powerful duo. Open banking connections to third-party financial service providers are flipping the data experience to favor the consumer. Anyone can download a financial management app, grant permission to access their bank accounts, and be guided easily through opening accounts, investment suggestions, and loan applications. This happens in moments, not hours or days.

Fintech AI systems process massive amounts of data in milliseconds. App and service developers can leverage this power to analyze a consumer’s subscription payments, utility bills, direct deposits and loan obligations near-instantaneously. Machine learning and AI engines can use this rich, real-time data to suggest smart financial planning and investing options. It’s a growing expectation that has to be accounted for in app development. Exposure to the open banking ecosystem is raising the level of consumer financial literacy, and it’s happening quickly. As a result, financial decision-making can improve dramatically. Consumers are seeing the positive results of adoption in their bank balances: 35% of respondents to the survey say improved financial health is why they use fintech.

4. Automate It!

No one leaps out of bed in the morning in wild anticipation of paying the electricity bill. Mundane, time-consuming financial tasks don’t actually have to absorb anyone’s time. Open banking allows easy setup and maintenance of connections to financial institutions, allowing consumers to set a variety of monthly payments and subscriptions to auto-pay. With the average consumer spending $273 per month on a mixed bag of small payments, automation saves a considerable amount of time, and it ensures payments aren’t missed. U.S. households average nine separate payments per month just for entertainment subscriptions. Add gym memberships, retail subscriptions and utilities to an ever-growing list of small, recurring transactions, and the benefit of utilizing technology to manage these payments becomes obvious. 26% of North Americans surveyed are attracted to technology to help them automate these little chores, freeing up their time for more important concerns.

5. Getting a Better Holistic View of Finances

Gone are the days when consumers used file drawers stuffed with manila folders, neatly tabbed, in an attempt to keep checking the pulse of their financial health. Open banking data has spawned a wealth of apps and services that give consumers and small businesses an up-to-the-moment picture of their finances. Open banking connections across accounts and across financial institutions power the apps that consumers are using to take their financial temperature. The growing expectation is that individuals should be able to see what their money is doing and where it’s going, 24 hours a day. 18% of North American users said that tracking their money was a major driver for fintech adoption.

To drill down even further into the use cases driving consumers to fintech, read the full study here.

While digital experiences are rapidly becoming the norm for mortgage lending, the verification process has largely remained a manual, paper-driven process. Fortunately, this is changing.

Finicity, a Mastercard company, is the only authorized report supplier that offers a digital, single-vendor solution for assets, income, and employment authorized for representation and warranty relief through both Freddie Mac and Fannie Mae. By automating the asset and income verification process, providing transaction data for rent payment history and providing a 10-day pre-closing report, we can help you streamline the approval process and in turn even be a more inclusive lender.

Approved by Freddie Mac and Fannie Mae

Finicity is an authorized supplier for Freddie Mac’s Loan Product Advisor® AIM, which automates borrower assets, income, and employment assessment for lenders. By leveraging the expertise of third-party service providers, AIM helps to deliver a simpler, more efficient loan origination process.

Fannie Mae’s Desktop Underwriter® (DU®) validation service also accepts our mortgage verification services to independently validate borrower assets, income, and employment data—providing Day 1 Certainty® on validated loan components. By digitally validating secure third-party data through DU, you can help eliminate the paper chase and help get your borrowers approved quicker.

Rent payment history in credit decisioning

On September 18, Fannie Mae introduced the inclusion of rent payments in their automated mortgage credit decisioning process in DU. Fannie Mae identifies recurring rent payments in bank statements and transaction data as a factor which could deliver a more inclusive credit assessment.

For first-time homebuyers who may have a limited credit history but a strong rent payment history, the enhancement creates new opportunities for homeownership while still promoting safe lending. Fannie Mae said 17% of applicants who have not owned a home in the last three years and who did not receive a favorable mortgage recommendation could have instead received an “approved” or “eligible” recommendation if their rental payment history had been considered.

To take advantage of the rent payment history feature, Finicity provides a Verification of Asset and Income (VOAI) report through its Mortgage Verification Service (MVS) that includes up to 24 months of transaction data that Fannie Mae can use to identify rent payment history and provide a more favorable credit assessment.

The VOAI report can be called with a direct API or is available currently in ICE Encompass and Encompass Consumer Connect, as well as the SimpleNexus mortgage point-of-sale (POS) platform.

In addition to VOAI, we’re pleased to announce that we now offer Verification of Asset (VOA) as a standalone product. Lenders can utilize Finicity’s VOA report to provide 12 months of data and participate in Fannie Mae’s rent history assessment. Lenders have the freedom to access two and 12 months of data to satisfy their own underwriting requirements, while VOA automatically sends 12 months to Fannie Mae, keeping the file GSE-compliant.

The VOA report is available via direct API connection or on most ecosystem platforms.

10-day pre-closing verification

Additionally, Finicity’s 10-day pre-closing reports provide just the right data GSEs need for 10-day verification of employment.

In adding a 10-day pre-closing report to our mortgage verification services, we have enabled lenders to receive only the data GSEs require for the 10-day verification. You can use these 10-day pre-closing reports to view just your borrower’s employment status rather than refreshing our current full reports that contain financial data. This minimizes the introduction of new income data or other redundant and unnecessary underwriting changes.

One of the reports available is the VOE Transactions report, which contains 120 days of refreshed transactions with dates and description but no amounts or totals so that income is not re-assessed. It shows the latest direct deposits in the income streams so that it can be determined that the borrower is still being paid on their regular cadence.

Another option is the VOE Payroll report. This contains only employment status—no income or other data—so lenders can see that the individual is still employed according to their payroll provider.

Our 10-day pre-closing reports are part of MVS at no extra charge and are currently only available for lenders connecting directly to Finicity.

These new reports could help you improve accuracy and simplify the process of verifying employment within ten days of closing, which is simplifying the loan origination process even further without increasing risk. Because these products are part of Finicity MVS, you would no longer have to call your borrower’s employers to get the information or manually ask for any extra interaction from the borrower.

How can you access these 10-day pre-closing reports?

To pull the VOE reports today, your team will need to code directly to the endpoints. You can find documentation here. As we integrate them further into LOS and POS platforms, they will be even easier for consumer loan officers to access. To see Finicity’s Mortgage Verification Services in action, request a demo here.

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