The Democratization of data: Protecting consumer rights in the battle over data access

How much should I save for retirement? How aggressively should I pay down my student debt? How much money should I have in savings?  Millions of consumers face these types of questions every day as they seek to gain control over their finances. As they work to right-size their financial lives, consumers often turn to trusted financial advisors, friends, and relatives. But increasingly, consumers are also turning to the online space where a rich ecosystem of powerful applications created by innovative fintech companies offer an invaluable source of information and solutions to improve financial planning. For example, want to create an investment plan and interact with an advisor via Skype? Try Modern Dollar Planning. Need to figure out which student loan is best for you? Visit SoFi.com. The financial resources available to consumers today are only limited by the imagination of the fintech community and the evolving needs of consumers. This rich new ecosystem is a boon for harried consumers seeking advice and direction on the fly, though the number of solutions and services can often be overwhelming. But, as varied as this business ecosystem is, there’s one important element that ties all of these solutions together. And that’s access to data.

The more information a fintech company can access, with your permission of course, the better the budget plan, the investment recommendations, and the overall results you can expect. Understanding what you have today in the way of assets and debts is critical to figuring out where you want to go, and how you can get there. In the old days, a roadmap helped you figure out how to get from point A to point B, but with GPS, your smartphone can more easily help you navigate the highway. What’s happening today, is that your smartphone (as well as online solutions) are providing a superior map forward, well beyond a simple Excel sheet that tracks expense and income.

You’d think accessing your data would be simple, but gaining access to your financial data is a complicated process. Think about it. There are thousands of banks that store consumer information, each doing it a little bit differently from each other. Plus, not every bank has the technology (or the appetite) to enable consumers to access and easily share their own data. In this article, we focus on one key question: should consumers have the right to access, use, and share their financial data as they see fit? Or should the financial institution hosting the consumer data make the call? This question is being hotly debated among banks, data aggregators, and even by the agency tasked with enabling access to account information, the Consumer Financial Protection Bureau.

Most of us have accounts with banks, including checking accounts, savings, credit cards, loans, etc. In fact, around 93% of us use a bank in some fashion or another, and that makes banks a primary stakeholder in helping consumers optimize their use of fintech solutions. It’s the data that they house for you that informs the tools’ ability to analyze your financial status. Some banks offer their consumers an easy and efficient mechanism for sharing their data, while other banks restrict data access, which can contribute to poor consumer participation and a decline in financial wellness. Even the amount of access varies – some banks offer only a limited dataset of consumer information to share, or are inconsistent in making the data available, or choose not to allow any access to consumer information at all. Policy makers have taken notice of this confusion. In 2016, CFPB Director Richard Cordray of the Consumer Financial Protection Bureau (CFPB) expressed concerns about financial institutions limiting their customers’ data access, and called on financial institutions to ensure consumers have continuous, unfettered access to their data.

The Comptroller of the Currency has also acknowledged the need for more dialogue and collaboration between regulators, financial institutions, fintech companies, and other innovators to give consumers and businesses greater and more efficient access to financial products and services. To this end, the Office of the Comptroller of the Currency (“OCC”) has created an Office of Innovation to provide nationally chartered banks with a regulatory framework that supports responsible innovation. Consumers who seek to improve their financial health need accessible advice and direction – which is only possible if they can efficiently access and share their financial information and take meaningful action to improve their financial state. It’s painstakingly evident that consumers need guidance, as the state of financial affairs, both in the US and globally, is in many respects very poor. For example:

  • Nearly half of American households say they’d have to incur debt or sell assets to pay for a surprise $400 expense.

When consumers can access their financial information via the tools and providers they choose, they have more opportunities in the marketplace. They can use financial software from independent companies to create and monitor a budget, minimize the fees they incur from their financial institutions, optimize their investments, manage fixed incomes, and perform other key financial tasks. Consumers can also turn to investment advisors for help – and with a holistic view of their clients’ financial positions, advisors can more easily provide recommendations and advice in their clients’ best interests.

Congress agrees that consumers have a right to their financial data, with Congressman Patrick McHenry and House Majority Leader Kevin McCarthy working on an innovation initiative to support fintech innovation, access, and growth. Part of this initiative encompasses a regulatory sandbox approach, similar to the approach taken in the U.K. Current legislation backs consumer access to innovative technology, with Section 1033 of the Dodd-Frank Wall Street Reform and Consumer Protection Act stating that consumers must be given the opportunity to take advantage of the broad range of technology-powered, data-driven tools available in the marketplace which empower them to improve their financial health. Despite this legislation, access to financial transaction data to power these impactful tools is under threat.

While a small number of financial institutions have moved to limit the amount of data that consumers can access, other institutions are seeking to define bilateral agreements that would restrict consumers’ abilities to take advantage of competing marketplace solutions. That approach might work for some consumers, but what about the millions that aren’t covered by those agreements? There are ways in which the wider financial community can look to remedy this situation and build on Section 1033 of the Dodd-Frank Act.

At Envestnet | Yodlee , we propose a consumer bill of data rights, that codifies a consumer's absolute right to control access to their financial data in whatever manner they choose and, in turn, to utilize the power of technology to improve their financial well-being. The democratization of data comes with requirements for all stakeholders in the 21st century’s financial services system, all in support of enabling and protecting the American consumer and their financial data. A consumer bill of data rights can help grant secure access to consumers’ financial data, while defining the roles and responsibilities of each player in the market – from fintech providers and data aggregators to the financial institutions hosting the data. Under such a bill of rights, financial institutions are compelled to safely and securely share their customers' data upon consumers’ request, aggregators work to securely enable the connection between financial information and the data-driven fintech tools consumers wish to use, and fintech service providers ensure that appropriate safeguards are integrated and balanced in all new innovations.

This coordinated approach ensures we’re all working toward a common goal that places consumers at the forefront. The end result? Consumers are empowered to use financial technology to its fullest potential, as a tool to take better control of their finances and improve their financial well-being. In order for this outcome to be achieved, the data needs to be freely accessible to consumers whenever they need it.

  "What’s paramount for all of us is first and foremost making sure that consumers have access to all their data." –Anil Arora, Chief Executive, Envestnet | Yodlee