Debunking Myths about Privacy and Security in the Fintech Industry
With the explosion of fintech tools available to consumers over the last several years, some financial institutions are advancing the notion that consumers put their privacy and security at risk when they use tools provided by anyone other than their bank. At Envestnet | Yodlee, we don’t find this to be true and would like to debunk some common myths about privacy, security and consumer data rights:
Myth: Fintech is like the “Wild West,” operating without any regulation or government oversight.
Fact: The idea that fintech companies operate in a regulatory vacuum or without appropriate oversight is simply not true. In the US, all fintech companies must operate within the confines of applicable local, state and federal law. Many operate under the supervision and examination of a federal regulatory agency. Envestnet | Yodlee, for example, is an FFIEC-supervised Technology Service Provider, that is also supervised and examined by the Office of the Comptroller of the Currency (OCC) and other major banking regulators. Further, at Envestnet | Yodlee, we have undergone nearly 200 audits by financial institutions over a recent 24-month period.
Lastly, and importantly, regardless of what regulatory agency has jurisdiction over a fintech company, that company must adhere to the rigorous data protection standards of the Gramm-Leach-Bliley Act – the same federal law that protects your privacy at your bank.
Myth: Fintech companies lack rigorous security controls.
Fact: Unlike banks and traditional financial institutions, fintech companies are not faced with managing aging, legacy technology infrastructures across a patchwork network of systems. In addition, since fintech companies often employ the latest security technology, the fintech ecosystem is more secure than many legacy bank systems. Fintech innovators take significant measures to protect the security of your financial data, and many fintech firms are subject to third-party audits and due diligence by their bank partners.
Myth: Once a consumer permissions their data to a fintech company, they don’t know how their data is being used, and lose control of it.
Fact: Fintech companies clearly disclose to consumers what data they need to collect to provide the product or service they are offering and how that data will be used. Much like your relationship with your bank, this disclosure is provided in the terms and conditions you agree to when you initiate your relationship with a fintech company. These disclosures are dictated by the Gramm-Leach-Bliley Act, the same data privacy law with which your bank must comply. And of course, all consumers have the right to terminate their use of their registered service, at any time.
At Envestnet | Yodlee, protecting the personal information of those who use our customers’ products and services is a top priority. We never sell consumers’ personally identifiable information (PII) to anyone. And, even if we wanted to (and we don’t), we couldn’t. We typically receive transaction data elements in a de-identifiable form that does not contain personally identifiable information. As an additional layer of protection, we employ systems that scrub any data potentially containing PII in accordance with the highest privacy standards and industry best practices.
Myth: Banks’ attempts to restrict fintech tools are for consumers’ own good
Fact: Research shows that consumers disagree. According to a recent survey by Blumberg Capital, two-thirds of Americans agree that fintech gives consumers access to services previously available only to the wealthy, while 69% said that such technology will help people become better off financially. That same survey found that three-quarters of Americans believe that fintech gives them more power over their finances. Lastly, a recent study commissioned by Personal Capital found that the average American holds 15 accounts across a range of financial institutions. Keeping track of these checking, savings, credit, retirement, and investment accounts at disparate institutions – and creating and monitoring actionable budgets across all of them – is only possible through fintech tools.
Technology innovation in the financial services industry can create inroads for underserved consumers to access financial services. Competition in financial technology innovation, especially between different types of institutions, benefits consumers in the long run. It drives down prices and incentivizes companies to innovate and create better products or services to help consumers improve their financial well-being.
Myth: Can’t consumers who want access to their financial data just switch to those institutions that offer the best access for their chosen fintech tools?
Fact: Changing banks sounds easy, but it’s not. According to Consumers Union, changing banks can take four to six weeks in order to switch a payroll deposit, or the automatic payment of a mortgage or auto loan. To ensure a smooth transfer, typically a consumer must have sufficient funds to support two accounts for some period of time, and have enough in both accounts to avoid overdraft fees and meet minimum balances to avoid account maintenance fees.
Some banks charge account closure fees if consumers decide to take their business elsewhere within a certain timeframe, or fees for services such as cashier checks, certified checks, or to wire funds into a new bank account. If using bill payment, the consumer will have to re-enter all the vendor information into the new bank’s bill payment site. Plus, account transactions history will not follow the consumer, who may then lose easy access to historical account debit and credit history.
To learn more about how the Envestnet | Yodlee data aggregation platform enables innovation, insights, privacy, and security, visit: https://www.yodlee.com/secure-data.