A new offering by the fintech Plaid is designed to help banks and credit unions create application programmable interfaces (APIs) that meet Financial Data Exchange (FDX) specifications.

Called Core Exchange, the API offering incorporates the FDX open banking specification, “but designed to simplify where that specification is a bit opaque and allow for an easy ability to actually build it,” explained Raja Chakravorti, who oversees financial access at Plaid. Core Exchange, announced to users in late May, also ensures the most critical endpoints that are necessary to connect to Plaid’s ecosystem are available in the API, Chakravorti said.

FDX’s API, currently on version 5.0, is an open banking API that standardizes financial data sharing. Open banking allows third-party vendors to access data collected by banks and financial institutions using APIs, and the standards developed by members of FDX aim to facilitate the movement of data in a uniformly permissioned way.

Plaid is a member of FDX, which has a global membership but predominantly operates in the U.S. and Canada. The organization is comprised of more than 200 financial industry members and stakeholders, including Bank of America, Citi, Capital One, JPMorgan Chase, MX, PNC, Royal Bank of Canada, TD Bank, The Clearing House, Truist, US Bank and Wells Fargo, among others.

Embracing the FDX API specification is part of Plaid’s strategy, which began in 2020, to shift toward API connections. When Plaid launched in 2013, few banks in the United States had external APIs that allowed people to permission their data to third-party apps, Chakravorti said. Back then, data aggregators relied on — and sometimes still rely on — screen scraping to bring data into their platforms.

APIs provided better security and trust within the ecosystem, Chakravorti explained.

“It also allowed for much higher quality data and consistency of that data as well, for the top 10 financial institutions, because the majority of them have their own bank-built APIs, and so we worked with almost all of them to integrate to those APIs,” he said.

The challenge is reaching the financial institutions that haven’t built out their own APIs and lack the large IT development teams to do so, Chakravorti added. This is the demographic Core Exchange targets.

“Being able to maintain multiple APIs probably becomes very, very difficult because you don’t have a huge digital team to throw at it,” he said. “The core exchange specification that we’ve launched is oriented around this interoperable, data-sharing specification that others can plug into.”

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