Consumer Financial Protection Bureau Director Rohit Chopra testifies before the Senate on banking, … [+]
I went to Las Vegas for Money20/20, one of the marquee events for me and many other fintech fans. I’m not saying this to make you jealous – although you should be, because I had a lot of fun and won a few hundred dollars at blackjack – but because I was thinking about this time last year, Cameron D’ Ambrosi wrote in the Liminal newsletter that Money 20/20 “is not a conference on digital identity, but payments are more anchored than ever on digital identity.” I couldn’t agree more. So I wasn’t surprised to see a lot more talk about digital identity this year, which was great because I never get bored of talking about digital identity. What surprised me was that I spent even more time talking about open banking. He arrived in America.
1033 and all that
This time last year, I wrote that governments around the world were embracing open finance and noted that the Consumer Financial Protection Bureau (CFPB) had committed to finalizing open banking rules for states -United by the end of this year. CFB Director Rohit Chopra said on stage At last year’s Money20/20, the Bureau reportedly proposed requiring financial institutions offering deposit accounts, credit cards, digital wallets, prepaid cards, and other transaction accounts to implement secure methods (such as APIs) for sharing data. Well, they did.
The CSFB is on schedule and has published its draft “Required Rulemaking on Personal Financial Data Rights”. These proposed rules are, make no mistake, a big deal.
Just to give some context, the proposed rule on personal financial data rights activates article 1033 of the Consumer Financial Protection Act of 2010 (CFPA) and aims to increase competition by prohibiting financial institutions from hoarding a customer’s data and requiring companies to share the data at the customer’s instructions with other companies that may offer better products. The proposed rule would allow people to break away from banks that provide poor service and would prohibit companies that receive data from misusing or illicitly exploiting sensitive personal financial data.
(Regarding the issue of increasing competition, by the way, there is no love lost between Mr. Chopra, the big banks and their professional associations and consortia. The Bureau has made clear that it hopes open banking will support increased competition by making it easier for consumers to compare and switch providers, from checking and savings accounts to credit cards. , loans or mortgages, thus bringing a dynamic to the market which is not considered an absolute advantage for incumbent operators.)
To sum up, the proposed rule would require custodian and non-custodian entities to make certain data relating to consumer transactions and accounts available to consumers and authorized third parties; establishing obligations for third parties accessing a consumer’s data, including important privacy protections for that data; and provide baseline standards for data access. The CFPB I want to be sure that consumers have a legal right to share their data without what they call “junk fees” and to easily switch accounts to get better deals and services.
Distribute the data.
I am very supportive of the proposed rule because it will prevent financial services players from “palisade» consumer data. I took the stage this year at the Money20/20 roundtable on “open data” (chaired by Michelle Beyo) and highlighted that while open data is likely to increase GDP, it depends of the circulation of data in the economy and not of their presence. locked in chests or used as a moat against competition. As a society we need open data, and open financial services are a good place to start. We need to move away from this era of data hoarding where companies now store whatever data they can get their hands on in case it’s worth something in the future. To the extent that it is in these reserves, the data does not serve the common good.
There is a great opportunity for fintechs that can use this data. Just like the doctor needs x-rays, blood, and histories, the AI that powers an effective financial health provider needs your transaction records from your checking account, mortgage, pension, your insurers and everywhere else. Today, obtaining this data and using it is a difficult area to operate because it must be done within the confines of privacy regulations and the ethical boundaries of “financial health”, but it seems to me that open banking environments that are emerging around the world mean that consumers should be able to more easily share this data with institutions that want to ensure good financial health.
Data for health
It is important to exploit this data as early as possible. In today’s economic downturn, many people need help managing their finances. Most of their mistakes are very basic. It doesn’t take a giant supercomputer or all the data available to keep people from falling into common traps related to how they borrow, save, spend and invest.
(One could imagine a situation in which employers strive to improve the wealth of their employees, just as they now provide health benefits by funding financial counseling as a fringe benefit.)
The cost of providing this type of financial health service, in a world of AI and machine learning, is affordable and provides real value to the normal person who, frankly, is as ill-equipped as I am to take decisions regarding pension plans. and savings and so on. This is why I am sure that the spread of open banking paves the way for a real revolution in the consumer credit sector and this time, it will be a revolution that will make life better for the average consumer.