A New Year’s Resolution for the Financial Data-Sharing Ecosystem

Effective solutions to financial challenges can come from anyone, especially those with firsthand experience. While it’s exciting to invest in or engage with serial entrepreneurs with a track record of success, consider opportunities from new market entrants who are seeking to solve problems in new ways. There’s room for any responsible organization looking to provide value.

Likewise, the definition of “value” encompasses a diverse spectrum of considerations. Obvious examples include:

• Better financial outcomes for consumers across all their financial behaviors (e.g., saving, spending, investing).
• Empowering small businesses to launch, grow, and compete.
• Research and analysis to improve commercial and public policy initiatives.
• Compliance and safety in the ecosystem.

Over the past decade, much of the innovation in permissioned financial data sharing was driven by being more X than the incumbents, where X equals agile, friendly, digital-first, faster, trendy, etc.

Recently, there has been more collaboration, but we still complain about our partners. “This bank doesn’t move fast enough” or “That fintech is playing fast and loose with my customers’ data” should sound familiar to many.

However, rather than expecting our partners to look or act the same from an operational or risk perspective, an equity mindset helps us understand that we’ve all started on this journey from different standpoints at different times but with a common goal to help improve people’s financial lives.

Banks must be deliberate in following their risk management programs to comply with regulatory and prudential obligations—the very nature of which resists agility. In addition, their technology stack is likely complex and has some legacy components, all of which support other internal and external customers. Considered approaches to development, change control, and operational management must be followed here too. It’s an equitable position to know this and incorporate it in the expectations of the partnership.

Fintechs, in general, are built on top of newer technology with more agile processes for development and deployment. These processes have integrated security controls and monitoring. So just because it is new and unfamiliar doesn’t mean it’s less safe. Looking at the results rather than the means is a more equitable approach than expecting them to do things your way. In general, fintechs run lean and hungry, so they’ll push the bank in service of their mutual customer.

Understanding that the other party may be willing but not able to give you everything you want is important to any collaboration. Then, the sum of the parts can be better than the whole to deliver on the joint value proposition while returning the desired respective values to the collaborators.

This is, admittedly, more complex than it initially seems. We’ve developed inclusion-supportive standards such as WCAGS and technologies such as voice-to-text to address users with physical disabilities. We consider developmental disabilities in the way we serve notifications, data, and nudges. We espouse conventions for documentation, terms and conditions, and privacy notices that can be understood by “readers with an 8th-grade education” in addition to required content. We may include language support if our target audience is global or if our target market has a significant population of non-English speakers.

However, we can do better to address those lacking digital and financial literacy. The latter is often talked about, but few are acting on it, with notable exceptions such as Stanford University’s Initiative for Financial Decision Making. In addition to being more inclusive across these gaps, product designers need to be more inclusive of experience requirements and relationships outside of the primary use case.

One recent example that is top of mind for me is “delegated access to accounts” in open banking experiences.

One of the key design criteria for open banking is to provide account data access without requiring the account holder to entrust their online banking credentials to a third-party provider or aggregator. Credential-based access was the state of play for over a decade, and while it fueled incredibly innovative and impactful experiences, it was regularly vilified for the inherent security and privacy risks. Open banking addresses those risks by ensuring the account holder is sufficiently involved in the decision to share their data and provides explicit consent to satisfy the data holder (e.g. bank) of their consent.

However, millions of account holders either cannot or choose not to engage with their financial institutions via this interface. Examples range from trustee and guardianship arrangements for minors or incapacitated account holders to professional relationships for retirement, tax, planning, and investment planning with credentialed advisors. These relationships are legally binding and today are forged outside of the open banking consent flow. For years, these authorized agents used the account holder’s credentials legally and responsibly to serve the needs of their clients. However, open banking consent flows exclude these relationships by design.

The premise of almost all open banking consent flows requires the account holder (or an account holder, in the case of jointly owned accounts) to engage in the account-linking consent process, negating the binding agency relationship for those consumers with legally authorized agents (e.g., advisor, trustee, guardian). In fact, this requirement ignores the definition of consumer per the applicable regulations. Dodd-Frank Act section 1002(4) defines the term “consumer” as “an individual or an agent, trustee, or representative acting on behalf of an individual.”

For the open banking ecosystem to be truly inclusive, and therefore available to all participants, the needs of everyone must be considered and accommodated.