Navigating Shared Finance: Empower Customers Through Identity and Authorization

Shared finance is defined by Forrester Research as: “Any situation in which a person acts as an observer of, partner in, or proxy for another person's finances" (Forrester, 2021). The clearest examples that fit this definition are standard joint checking accounts and shared credit cards, which are extremely common and offered by most if not all financial institutions to their customers. However, in reality, shared finance spans many use cases beyond a typical married couple’s joint finances. Examples include: parent-child finances, financial co-parenting between separated or divorced individuals who share a child, management of accounts for elderly relatives by proxy, roommates pooling funds to share common bills such as rent and utilities, and more. Many of these financial relationships are less clear-cut, grant different levels of access to different users, and their duration may vary from months to years.

There is value to be found for both customers and financial services organizations in each of these use cases, but this evolving approach to money management also presents a variety of challenges for financial institutions.

Today, fintech firms hold the advantage when it comes to delivering shared finance products. The fintech sector has introduced many innovations in shared services, delivering an excellent user experience while allowing individuals to reach shared financial goals even if they prefer to maintain separate accounts. For example, the popular joint budgeting app Honeydue lets couples manage a household budget and shared expenses while also providing space for each individual to address solo expenses. GoHenry offers tools for parents to teach children about money management by allowing parents to set flexible boundaries and goals for a prepaid debit card, helping children and teens to grow in financial independence and become smarter with gamified money missions that encourage financial literacy. The savings app Circle allows groups of people to save for common goals and fund them out of a shared wallet, permitting multigenerational families, friend groups, and other configurations of users to pool their resources towards common savings goals. 

These tools, like many other popular personal finance apps, may be linked to related online banks or neobanks, but they frequently stand alone. In these cases, they rely on connections to financial accounts where money is stored, which are often housed within legacy, traditional financial institutions. In this way, these applications become part of larger financial ecosystems. While these fintech tools are paving the way in shared finance, more traditional financial services providers have the potential to win over customers and offer innovative solutions to shared finance problems, whether by partnering with an innovator from the fintech community or developing a solution in-house.

As these use cases become more common, we must recognise that identity can be extremely complex in a financial services context. An individual customer possesses only one identity, but they may have access to multiple accounts, with different rights and permissions to each. One customer may simultaneously have access to an individual account as well as multiple shared accounts: a joint bank account with a significant other, oversight into a minor child’s account, delegated authority for an elderly parent’s account, and a business account for a small business that they own. Retirement accounts, savings accounts, and investment accounts may also be in the mix. Some banks attempt to solve this issue by creating separate identities for different contexts. Unfortunately, this is a poor solution that is difficult to manage for both the business and the customer.

Furthermore, customers expect to manage these relationships dynamically. They also expect an excellent experience in their digital channels, as they are increasingly unwilling to visit a branch to update these arrangements. Instead, they want self-service mechanisms to delegate access and manage account sharing settings and consents. In effect, it is the end-user – the customer – who is the manager of these sharing settings.

From an Identity and Access Management perspective, different users are granted entitlements on accounts. These entitlements confer certain permissions to different users: for example giving a child permission to perform transactions up to a certain daily threshold, but no further, or giving a family member permission to perform certain actions on an elderly parent’s account.

In effect, this means that a single customer can have access to multiple accounts, with different access arrangements for each. This means two things: first, the business needs to have visibility, consistency, and agility in managing permissions across every type of account, and second, the customer needs to have flexible mechanisms to make ad-hoc changes according to their specific needs. 

It is the identity of the user that ties these requirements together. A strong identity and access management solution can provide many benefits to financial institutions, delivering smoother omnichannel customer experiences and providing a single view of the customer. But more importantly, identity can support digital interactions between a financial institution, their ecosystem of partners, and their customers.

If identity establishes who the user is, authorization helps to control what that user can see and do inside the application. In order to successfully address shared finance use cases, organizations must have strong mechanisms to support both. Identifying customers and unifying their experience across every channel and type of account is critically important, as it leads to higher levels of customer satisfaction, loyalty, and lifetime value. However, it is equally important to get granular with permissions and entitlements when multiple types of accounts and shared finance scenarios are involved.

Shared finance as we understand it today is still a relatively new concept, and new use cases for different types of shared services are arising all the time. Ultimately, however, the need for these types of tools comes from an increased focus on financial wellness. Consumer expectations continue to rise, and financial institutions must offer the flexibility that customers demand in order to keep their business. While this presents a challenge for financial services organizations, it can also be an amazing opportunity to grow trust and loyalty.

By harnessing the power of identity and authorization, financial institutions can empower individuals to reach their financial goals. Building the infrastructure to support shared finance allows organizations to better respond to changing consumer needs, and Identity and Access Management solutions are a key enabler for shared finance use cases.

Learn more about Ping Identity’s solutions for financial services organizations. To discuss how Ping Identity can help you explore initiatives around shared finance, contact us today.

 Wannemacher, Design Shared Finance Products To Drive Growth. Forrester. 2021