Putting consumers back in control of their financial data
In FinTech, as in many other areas of technology, there has been a focus on making “legacy” products more mobile, more transparent and less expensive. In fact, financial services providers should go even further on each of these aims, given the relatively low bar.
Traditionally – and still to a greater degree than we’d like today – financial data has been an asset held in the hands of big financial institutions and providers who limit availability and charge individual consumers a hefty price in order to access it. For instance, the three big credit bureaus have long held consumer credit data – needed to secure a new line of credit, car loan, or home mortgage – behind a paywall. In fact, it wasn’t until the passing of the Fair and Accurate Credit Transactions (FACT) Act of 2003, that consumers were granted free access to their own credit reports – and still, only once every 12 months (more frequently under specific circumstances). Given the importance of credit report information and the fact that it determines the outcome of very consequential decisions, it seems to us that consumers should have free and unlimited access to their own records.
On a similar note, a recent skirmish over consumer data between big banks and sites like Mint (who have used screen-scraping to gather a consumer’s financial data from multiple sources and present it for personal financial management purposes) has highlighted some of the reservations that larger institutions have in allowing more open access to consumers on their books. While there are legitimate reasons for banks to not want screen-scraping to exist, the underlying consumer value of Mint and others has been impacted by a few big bank’s decisions to move against them. Fortunately, it seems these institutions are working on their own APIs for financial data, but consumers may question if it’s quick enough.
In contrast, other industries have been more visible in utilizing technology to improve access to personal data. For instance, the healthcare sector has seen a rapid adoption of electronic health record (EHR) systems. Among many other benefits, EHRs offer patients rapid and convenient online access to their personal health information. This gives patients greater control over their health data, facilitating the tracking of their health and transferring information when seeing a new provider. Moreover, HIPAA (the Health Insurance Portability and Accountability Act of 1996) grants patients the legal right to access their personal health information and places detailed restrictions on fees that providers can charge for medical record requests.
The energy sector is also moving in a similar direction with more utility companies deploying smart meter infrastructure. As a result, a growing number of consumers now have access to their real-time energy consumption data. This increases transparency over utility bills and helps consumers make more energy- and cost-efficient decisions.
Unfortunately, given some of the complexity and “protective instinct” that defines parts of the financial industry, we’ve seen less major efforts towards transparency and accessibility of consumer financial data. The credit bureaus continue to sell consumer data to lenders and marketers for profit while blocking consumers from easily accessing their own information on a regular basis, and big financial institutions have yet to provide great APIs for authorized access to their consumer’s financial data. This seems a bit backward.
We’re hopeful that between calls for more transparency and startups challenging incumbents, disruption brings an easier flow of data back to consumers. Today, consumers can turn to Credit Karma for free access to credit scores and credit monitoring; Robinhood provides free stock trading. All of these service businesses were built for mobile and transparency, so consumers could make transactions and trades, get alerts and gain insights on-the-go.
Let’s see if we can’t get more FinTechs and financial services businesses on board.