Open Finance Exposes the Limits of the Primary Account

A primary financial relationship loses some of its value when the provider can see only a fraction of the customer’s money.

Consumers now routinely distribute checking, savings, credit and investments among several institutions and apps. For banks and FinTechs, that creates two gaps. Money held elsewhere can’t generate deposits, transactions or other business for the provider. Just as important, activity elsewhere can hide changes in the customer’s finances that could signal an opportunity or a problem.

Account primacy has traditionally meant becoming the institution where customers receive income, keep deposits and conduct much of their everyday financial activity. That position still carries obvious advantages, but it is becoming less comprehensive as financial relationships fragment.

PYMNTS Intelligence noted in reports earlier this year that the average U.S. consumer holds between five and seven financial accounts. Another report indicates that credit unions are the primary financial institution for 61% of their account holders.

Recent announcements indicate that far-flung data’s one way to synthesize activity and accounts towards a more central point of contact.

The Personetics-Plaid partnership announced last week addresses the information side of that fragmentation.

Banks and credit unions using Personetics will be able to combine their own customer information with permissioned open-banking data from accounts connected through Plaid. That adds accounts held elsewhere to the financial picture available inside the institution. Personetics says the data can be used to identify deposit-retention and cross-selling opportunities.

Put into practical terms, an institution can see that a customer who appears to have relatively little savings with it has substantially more cash elsewhere, or that a customer making regular loan payments from its checking account has a liability with another lender.

Outside Data Changes the Existing Customer Equation

Separately Perplexity expanded its Plaid integration in April so users can connect bank accounts, credit cards and loans, adding those relationships to brokerage accounts already supported. Users can analyze spending, liabilities and net worth across the connected accounts. The access is read-only, so Perplexity is not holding the deposits or originating the loans. It can nevertheless become the place where the consumer sees those relationships together.

SoFi followed in June with an artificial intelligence financial-planning feature that allows members to connect accounts from more than 12,000 institutions. Its financial coach can then analyze spending and debt using activity that extends beyond products held at SoFi.

The value of primacy becomes more tangible when customers begin adding products rather than simply maintaining an account.

SoFi provides one of the clearer measures. In the second quarter, 51% of new products were opened by existing members, up from 35% a year earlier, according to PYMNTS’ coverage of its July earnings. Products per member reached 1.54. That followed a first quarter in which existing members accounted for 43% of new products.

The activity extends beyond account openings. SoFi said annualized spending across its Money and Credit Card products exceeded $28 billion in the second quarter. Its SoFi Plus subscription offers another measure of cross-selling: 85% of its roughly 206,000 subscribers were already SoFi members, and 25% subsequently opened another product. Management said those members were also increasing deposits, assets under management and spending.

Happen Bank’s gains from cross-pollination are also in evidence. Its customer base was built around lending, and its checking and savings products are now giving it a way to retain customers after the original borrowing transaction ends.

Happen Bank, formerly LendingClub, is showing measurable cross-selling from lending into deposits. In the second quarter, LevelUp Checking account openings quadrupled year over year, with existing borrowers accounting for more than half of new accounts, while borrowers represented 20% of new LevelUp Savings accounts opened year to date. Deposits reached $10.8 billion, up 18% year over year, giving the company more business from customers initially acquired as borrowers.

The economics of primacy are starting to look less like ownership of an account and more like participation in a household’s overarching financial activity. A provider does not need every dollar to sit on its balance sheet, but the more of the customer’s financial picture it can see, the more chances it has to compete when those dollars move.