Banks vs. Bots

Author

Arjan Schütte

August 23, 2016

Fintech is en vogue right now, and for good reason. Trim’s digital assistant cuts unwanted recurring bills automagically. Mint tracks our expenses and helps us achieve our goals. Digit squirrels away bits and pieces into a savings account.  Venture capitalists, myself included, invested as much as $19B into financial technology startups like these in 2015 alone.

Much of this financial revolution hinges on invisible technology that serves as a pipeline between consumer apps and our banking, credit card, and brokerage data. This technology operates in the background, compliments of companies called “aggregators” like Yodlee, Intuit, and Plaid.  You link apps like Trim, Digit, or one of thousands of others to your bank account, and you give those services explicit permission to pull together your data and start doing their magic. All is good – or is it?

Last year, several large banks including Chase, Bank of America, and PNC were upset with these aggregators, claiming they were slowing down their servers, infringing on their customers’ privacy, and breaching their security. These banks have temporarily and secretly shut down access to the aggregators, thereby to much of this wonderful crop of next-gen financial health apps built on top of them. Ominously, the banks are threatening to pull the plug on this data permanently. A fight is brewing to determine who owns that data: banks, or their customers.

It’s important for regulators and consumers to understand the stakes here. Banks cutting off access to the aggregators is akin to Facebook deciding one day that users cannot download any of their own photos. For privacy and free-speech advocates – or, for that matter, anyone who cares about property rights—the idea of banks doing a land grab for your data should be anathema.

At the end of the day, my financial data belongs to me. It’s a ledger of my financial history which I entrust the bank to keep straight.  If I allow a budgeting robot to view my financial history, the bank should honor that request. Period. If banks challenge that premise, we are rolling back genuine innovation and disempowering everyday people from having their money work harder for them — which they badly need when you consider 50% of the population can’t come up with $400.

Already, regulators in the UK have come down on the side of the consumer, pushing banks to make customer financial data freely available. US regulators should follow suit. The aggregators should play by rules, like the credit bureaus do with our credit data, while realizing the power of data and potential to make our lives better.

 

This article was written by Arjan Schütte from Forbes and was legally licensed through the NewsCred publisher network.

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