There are no heroes or villains in data access debate
Both sides in the debate over access to consumer financial data — traditional financial institutions and fintech companies — have valid, well-intentioned points. But, of course, both sides are acting out of self-interest too.
Fintech companies argue that there should be easier access to data for all. They say it falls to depository institutions — that predominantly guard that data — to unlock the door so consumers have greater control and third-party financial management apps that consumers want to use can work more seamlessly. Yet, candidly, those fintech apps’ business model relies on easier access.
Some banks and credit unions, meanwhile, have been more cautious about unlocking the door. They cite the need for stronger customer security and clearer terms and conditions before sharing data. But for them, opening the door also risks ceding revenue advantages to nonbank competitors and accruing new costs associated with sharing access.
While this type of interindustry disagreement is nothing new in financial services, this one may have more at stake for the future of how consumers engage with their money in a digital age. The debate about which side is right about the appropriate method of opening up access is distracting from the real issue at stake: the pace of innovation.
At the end of the day, they’re both right and they’re both wrong. The longer it takes for banking and fintech industries to put down their swords on this issue, the longer it will take for consumers to realize the benefits of effective financial data tools.
Today, consumers don’t always have real-time access to their data, meaning dozens of money management apps are helpful only in theory. There is no point in using a budgeting app or online loan application that relies on old numbers and spits out service-error messages. These consumer tools are only illusions of progress toward financial health. In fact, this kind of dysfunction can also be dangerous for consumers, if it leads to transactions based on incorrect information about their accounts.
The industry is working on numerous initiatives to make progress in digital banking services. Some banks, like Wells Fargo and JPMorgan Chase, have announced application programming interfaces with Xero and Intuit. The Center for Financial Services Innovation is trying to get banks and fintechs together in using a common principles-based data-sharing framework, while data-sharing standards like the Open Financial Exchange already exist. The Consumer Financial Protection Bureau’s interest in consumer data access could also result in a common sharing framework.
But one avoidable thing getting in the way of actual progress is the debate over which sector is more right on this issue: banks or fintechs. Financial data access has long been fodder for passionate argument on both sides, including over the side issue of screen scraping. But the debate is getting even more intense at a time when the CFPB has sought comments on the topic, fintech apps relying on the technology are multiplying and the use cases are advancing to include moving money, underwriting loans and opening deposit accounts quicker. In short: We’ve moved on from the salad to the steak.
A glance at some of the comments submitted to the consumer bureau reveals that not only are both sides sticking to their guns, but they both have legitimate arguments that contribute in equal measure to developing a common data-sharing solution. Who could argue with the point raised by the Consumer Financial Data Rights group, for example, that “consumers have a right to share this information with third parties that can empower them to improve their financial well-being.” Of course!
Likewise, the concern raised by Luke Martone, senior director of advocacy and counsel at the Credit Union National Association, about “the potential liability associated with unauthorized transactions or data breaches resulting from a third party’s use of a consumer’s financial data,” seems just as defensible.
Guess what? They’re both right, and data aggregation is not a black-and-white issue. This isn’t "Star Wars." If anything, the data-access debate is more reminiscent of the lyrics from "Into the Woods": “Witches can be right. Giants can be good.”
Yes, the industry will come up with solutions in time. Open banking is coming. Just look at Europe. But let’s remove one of the obstacles to transforming the business model by accepting this reality: There are no heroes or villains in data access debate.