Hi y’all —
I’ve long joked that Money should just deposit my paycheck directly into the coffers of Madison Square Garden. I go to so many concerts there that it seems like a logical arrangement! Think about how much more efficient it would be if we skipped the middle man — me — and handed over my wages to the place I’m going to spend them all anyway.
This is mostly a self-own, but it’s not an outlandish idea. It's actually similar to a movement happening right now called open banking, which involves connecting various financial accounts for better money management.
My Money-MSG partnership proposal aside, I want to learn more. What is open banking, and why is everyone talking about it lately?
Shaun Vanderkaap, vice president of strategy for Link Money, tells me open banking is what happens when an account owner gives permission for third-party service providers to access their financial data. The term “open banking,” therefore, refers to banks opening up their application programming interfaces, or APIs.
(Bear with me, I promise this is about to get interesting.)
It all has to do with the value — and use — of my bank data, says Dee Choubey, the co-founder and CEO of MoneyLion.
“Not even that long ago, that data was walled,” he says. “Where you were spending on your credit card, where you were spending on your debit card, whether you're taking money out of your ATM, all of that data was … sitting inside a [bank] server somewhere.”
Because of this, the data was effectively locked up; the banks had a monopoly on it. But then people began to realize that if they gave permission to share their transactions, software applications could provide insights into their spending habits.
A good example of this is Mint: I hooked it up to my Bank of America accounts way back in 2016, and ever since it’s kept track of my spending by automatically sorting my transactions into categories like Clothing, Air Travel and Cash & ATM.
“Basically anytime you're linking your bank account [to something] is open banking,” Vanderkaap says.
Initially, these services were limited to screen scraping, or basically getting a person’s login info, going onto their bank website and copying the HTML so they could parse the contents. But “the banks got annoyed,” Choubey adds, because third parties were taking valuable data without paying for it. Screen scraping also wasn’t super secure.
This gave rise to a debate: Who truly owns someone’s bank data? Is it me (the customer) or the financial institution that I use?
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