Finicity and Brex forge secure data access agreement

Fintechs deepen their relationship to reduce friction with permissioned data

The global open banking market is projected to reach $43.15 billion by 2026. That’s up six-fold compared to $7.3 billion in 2018. 

What is driving this hockey-stick growth pattern? Consumer adoption plays a big role – and this has only accelerated in 2020 as COVID-19 pushed more consumers to test and adopt new apps and services. But the most important factor may actually be innovation and data partnerships. 

Consumers and businesses benefit from open banking because they have more access to vendors, such as the ability to get better interest rates for savings and loans. And like all open marketplaces, the market becomes exponentially stronger when friction is reduced. The most powerful way to reduce friction in the financial services ecosystem is collaborative data partnerships that enable data to be delivered securely and in a format that enables personalization and customization. 

In a recent interview with FinLedger, Philipp von Girsewald, U.S. CEO of Deposit Solutions, a German open banking/open architecture platform said, “We won’t go back to our old normal. One aspect of these changes is that we’ll continue to see a greater influx of collaborative relationships in order to innovate and digitalize quickly.”

The data floodgates have opened, there is no turning back.. 

Finicity and Brex 

On December 18, Finicity announced the company has signed a data access agreement with Brex, a fintech company that offers business credit cards and cash management accounts to technology companies. 

Brex, which will turn 4 years old in January 2021, has raised over $700 million in equity and debt financing from high-profile investors including Y Combinator Continuity, Kleiner Perkins, and the founders of PayPal. Today the company is focused on “reimagining financial systems so every growing business can realize their full potential.”

Finicity, which was acquired by Mastercard in November 2020, helps consumers and businesses make financial decisions by leveraging fast, high-quality data. The company provides an open banking platform that seeks to put consumers in control of their financial data. A sneak peek at the platform is available in this Mortgage Tech Demo Day video by HousingWire.

Through the agreement with Finicity, Brex customers will now be able to link their accounts to apps on Finicity’s secure data network – reducing friction and providing secure access. For example, a Brex customer may connect his/her business accounting app to automatically receive their Brex account transactions, or even permission a lender the ability to review business cash flow to establish and maintain a line of credit. 

“Finicity has been collaborating in earnest with financial institutions in signing data access agreements with banks and other traditional financial institutions. With our agreement with Brex, we are now extending our approach to fintechs,” said Finicity CEO and co-founder Steve Smith. “We look forward to working with Brex in pioneering the way financial data is utilized to help businesses grow and achieve their goals.”

And this isn’t the first time Finicity and Brex have worked together. In June when Mastercard announced the acquisition of Finicity, Henrique Dubugras, chief executive officer of Brex, was quoted in the press release saying, “Brex’s innovative offering uses Finicity’s connectivity, giving us access to the best quality business-permissioned data to power our platform. The combination of Finicity’s capabilities with Mastercard’s products and services will enable us to create innovative solutions to enhance our Brex offerings.”

How it works

Finicity and Brex will leverage the Financial Data Exchange (FDX) API standard, which leverages OAuth 2, a standard for securely authenticating and authorizing account access. OAuth eliminates the need for account holders to share their login credentials with third parties when permissioning the use of their data.

According to PwC, the FDX enables a broad cross-section of banks, fintechs, and financial services groups to align around a single data-sharing standard that could accelerate the adoption of open-banking API frameworks. The full benefit of APIs is achieved with external integration. Open APIs allow the secure sharing of data and applications with third-parties which can enable a wide variety of new services. By enabling third-party collaboration, unforeseen product development and an upgrade to the overall financial experience can occur.

In reference to the Brex and Finicity partnership Yelena Reznikova, director of product partnerships at Brex says, “​Growing companies need to move fast, which requires the ability to integrate their financial accounts with their external software​. We partnered with Finicity so that our customers can seamlessly connect their Brex accounts to their existing software stack and scale their business faster.”

More where this came from

And this isn’t the only collaboration deal that Finicity or Brex has cut this year. 

In September, Finicity announced that it had signed a direct data agreement with Charles Schwab. By sharing data via an API, Finicity said it will enable consumers, through their Schwab accounts, to more securely connect and allow direct access to their financial account data via third-party apps.

Finicity has formed similar data access agreements with TD Bank and BMO Harris.

And while not related to a data API, Brex announced in July a partnership with UMB Bank so that it can offer FDIC insurance on uninvested cash reserves up to $250,000.

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