Earlier this week, the House Financial Services Committee, Fintech Task Force, met to discuss individual data when it comes to financial services. In many ways, data is the fuel for Fintech innovation and thus is a key factor for both financial service providers as well as consumers and businesses.
The emergence of “Open Banking” or “Open Finance” has created significant value for users of financial services as it enables the seamless transfer of information between providers. But simultaneously questions remain as to how this data should be managed or controlled. In the UK, one of the leaders in Open Banking, the individual consumer owns all of its own data and only they can approve or provide this information to financial service providers.
In July 2021, President Biden issued an executive order on promoting competition that encouraged the CFPB [Consumer Financial Protection Bureau] Director to consider “commencing or continuing a rulemaking under DFA 1033 to facilitate the portability of consumer financial transaction data so consumers can more easily switch financial institutions and use new.” This recommendation accelerates the need for clear-cut rules defining what providers may, or may not do, with individual data.
While some advocates of Open Banking believe in “user-permissioned financial data sharing” some providers are less sanguine about allowing users to determine what data may be accessed or used.
Following the Fintech Task Force hearing, the Financial Technology Association (FTA) issued a statement on hearing. The FTA said the it “strongly supports” consumer-centric open banking regulation in the United States to “empower consumer choice, preserve data security, and ensure consumer privacy.”
“[The] FTA believes in well-regulated open banking platforms that allow free-flowing information, subject to privacy and security guardrails to give consumers complete ownership of their financial data. It is important, however, that regulation recognizes and supports the value of financial information in promoting improved, tailored, and more accessible financial products and services. Arbitrary limitations on the usage of data will chill beneficial innovation that drives clear consumer benefit, including the elimination of overdraft fees, greater access to credit, and lower costs. To this end, FTA encourages regulators and policymakers to:
Establish a broad data right that is consistent across direct and authorized access;
Create a level playing field for all Americans and ensure that Section 1033 rulemaking does not generate inequity for consumers, where consumers’ access differs depending on where they bank;
Allow for the free flow of data from other institutions that touch a consumer’s financial life, including payroll companies, telecom, and utility providers, and the government, which can provide, for example, Social Security data;
Establish strong guidelines for consumer transparency and control, including that consumers be aware of all parties involved in data sharing and have ownership over which data they are sharing, with whom, and for what duration; and
Support standards-development in service of consumer rights by establishing baseline principles and expectations that those standards must meet.
The issue of privacy and data control may be something that is able to cross the political aisle but, as always, the devil is in the detail.