Open banking is meant to let you share financial data securely, through APIs, without ever handing over your bank password. Where it’s live, it works well. The catch is that it isn’t live in most of the world yet: the rules are still being written in the US and Canada, and adoption is patchy elsewhere. That gap is why Skwad exists in its current form. We give you the benefits of open banking now, by reading the transaction alerts your bank already emails you, instead of waiting for the regulations to catch up.
Open banking: promise vs. reality
At its core, open banking is about enabling secure, standardized access to financial data through APIs. The ideal open banking ecosystem would feature:
- Consistent API standards for data sharing
- Strong customer authentication protocols
- Transparent consent mechanisms for data access
- Clear regulatory oversight to ensure fairness and security
However, the global implementation of open banking has been far from uniform. While the EU and UK have made significant strides with the introduction of PSD2, other regions like the USA and Canada are still in the process of defining and implementing their own open banking frameworks. In the US, the Consumer Financial Protection Bureau has been working through its Personal Financial Data Rights rulemaking to set those rules. This fragmented landscape has left many consumers unable to fully benefit from the potential of open banking.
The aggregator model: benefits and drawbacks
In the absence of full open banking regulations, third-party financial data aggregators such as Plaid, MX, and Finicity have stepped in to fill the void. These companies provide a way for consumers to connect their financial accounts to various apps and services, enabling features like budgeting, investment tracking, and more.
However, the aggregator model comes with its own set of challenges and limitations:
- Credential Sharing: All aggregators require users to share their bank login credentials, which often violates the terms of service of financial institutions and raises security concerns.
- Screen Scraping: Some aggregators rely on screen scraping techniques to gather data, which can be unreliable and prone to breakages when banks update their websites or security measures.
- Data Privacy: There have been high-profile cases of aggregators misusing or selling user data, leading to increased scrutiny and user distrust.
- User Experience: The need for frequent re-authentication and manual intervention can lead to a suboptimal user experience.
Skwad’s approach
Skwad takes a different approach to the aggregator model’s problems while still giving you some of the benefits of open banking. Here’s what sets it apart:
- Data Source: Instead of relying on direct access to financial accounts, Skwad uses existing bank transaction alerts and notifications.
- Data Ingestion: Users forward their bank alerts to dedicated Skwad email addresses, providing a secure and user-controlled method of data sharing.
- Data Processing: Skwad parses and categorizes the forwarded data, extracting relevant insights in real-time
It’s the same alert-based method behind tracking spending without linking your bank and balance tracking with no bank linking required.
This approach offers several advantages over traditional aggregators:
- Eliminates the need for users to share their bank login credentials
- Provides real-time updates based on bank alerts
- Ensures compatibility with a wide range of existing bank systems
- Enhances user privacy by processing only the data that users choose to forward
However, it’s important to acknowledge some of the limitations of Skwad’s approach:
- Dependence on the availability and consistency of bank alert systems
- Requires a one-time set up for email forwarding rules if the bank doesn’t support multiple alert email addresses
How Skwad compares to open banking
Skwad’s solution can be seen as a transitional technology, bridging the gap between today’s fragmented landscape and a future where open banking is the norm. By aligning with the principles of open banking, like enhanced security, user control, and transparency, Skwad is a solid alternative for people who value privacy and convenience.
| Feature | Open Banking | Aggregators | Skwad |
|---|---|---|---|
| Data Access | Full API access | Screen scraping | Alert-based |
| Security | Strong auth | Credential sharing | No credential sharing |
| Privacy | Regulated | Data selling concerns | Limited data exposure |
| User Experience | Smooth | Frequent re-auth | One-time setup |
| Regulatory Compliance | Full | Questionable | Compliant |
| Implementation Timeline | Years | Immediate | Immediate |
Frequently asked questions
What is open banking?
Open banking is a framework that lets you share your financial data through secure, standardized APIs instead of handing over your bank login. It relies on consistent API standards, strong customer authentication, transparent consent, and regulatory oversight.
Is open banking available in the US and Canada?
Not fully yet. The EU and UK have open banking through PSD2, while the US and Canada are still defining and implementing their own frameworks. In the US, the Consumer Financial Protection Bureau is setting the rules through its Personal Financial Data Rights rulemaking.
How is Skwad different from a data aggregator?
Aggregators like Plaid require you to share your bank login and often rely on screen scraping. Skwad instead reads the transaction alerts your bank already emails you, so you never share credentials and there’s no fragile connection to break. If you want a budgeting app that skips aggregators entirely, see why Skwad works without Plaid or a bank login.
Where this goes next
Open banking will get here; the standards are already forming through groups like the Financial Data Exchange. Until it’s universal, you don’t have to wait, and you don’t have to hand over your bank login to track your money. Forward your bank’s alerts to Skwad and get the security and control open banking promises, today.
