Traditionally, access to financial data has been limited to several parties: consumers, the government, and banks. However, with the rise of financial technology in recent years, fintech companies are pushing for a reform in the way financial data can be shared. Leaders in the fintech industry created a new group called Consumer Financial Data Rights (CFDR), to promote the sharing of financial data. This includes using open application program interfaces (APIs) to share data, and pushing cybersecurity to better manage the risk for the users of the data, especially for consumers. However, there are still many problems that still need to be addressed.
The Federal and Banking Perspective:
Both the government and the banking industry both believe that financial data should be limited. This is due to the following reasons:
- There should be a need for more control, rather than open access of financial data. This is because if financial data were to fall into the wrong hands, the parties involved, especially the consumer can be tragically affected. Which leads to:
- Questions about security. Is cybersecurity in a state where access to financial data can protect all parties involved? Who will be responsible if financial data were to fall into the wrong hands?
- And finally, competition. If the financial data were to open to more parties, companies can use this financial data to target consumers. Therefore, the customer’s privacy will not be protected.
The Fintech Perspective:
Leaders in the fintech industry are pushing for third party access to financial data. Reasons include:
- Better access to data allows consumers to benefit and better understand their financial situation and their options. This includes faster payments, and even letting vendors approve more loans to consumers.
- The sharing of data between financial institutions and third parties allows a more unified financial system.
Regardless of which side the argument lies, the questions of data privacy lies on the consumer. Financial institutions want stricter data access so that consumers can be protected from unwanted threats. And the Fintech industry want looser data access so that consumers can benefit from the technology that is available. The answer ultimately still lies in data privacy. If fintech companies and CFDR can prove that a cybersecurity system with the involvement of third parties is secure, then maybe both sides of the argument can come into agreement.
Sources:
– http://www.forbes.com/sites/forbestechcouncil/2017/02/03/the-importance-of-data-access-for-fintech/2/#57e3d0e56f28
– https://www.americanbanker.com/news/fintech-companies-form-lobbying-group-focused-on-data-sharing
– http://www.businessinsider.com/us-fintechs-are-lobbying-for-access-to-customer-data-2017-1