Tech savvy and time-starved Americans are using financial apps in greater numbers – nearly one-third according to a recent survey from The Clearing House – but these cutting-edge customers may be leaving themselves more vulnerable to potential online scammers.
Have you ever read the 56-page user agreement when you upgrade to the newest version of iTunes or any other “free” program? Of course not. Users of the latest fintech apps are almost always unaware that they’re often allowing their personal and financial data to be made available to unnamed third-party firms.
According to Ben Isaacson, Senior Vice President of product strategy for The Clearing House, “fintech apps work with third-party technology providers, called data aggregators, who use a process called “screen scraping,” whereby they log in using customer-supplied credentials to gain unrestricted access to customers’ personal and financial information.”
For the sake of convenience, users are allowing the fintech apps access to personal information – account numbers, bank log-on credentials, loan information and more.
This is where Connected Banking comes in. The Clearing House is advocating for the adoption of API-based data sharing, a safer and more secure means by which financial institutions, fintechs, data aggregators and other industry stakeholders collaborate can enable the safe and transparent sharing of bank-held data.
A major goal of Connected Banking is for consumers to control apps’ access to data, with scale and efficiency — no matter where they bank. Building out this new ecosystem requires changes to how the industry creates and standardizes APIs; how financial institutions and third parties contract with each other; how financial institutions conduct third-party risk management; and how the required infrastructure is delivered to enable consumer consent at scale.
Isaacson is optimistic. “If financial institutions, fintechs, and data aggregators succeed in working together, we will create an agile system that fuels sustained innovation while ensuring the level of transparency and security that consumers expect and deserve.”
Safety and security needs to be at the forefront of our data sharing ecosystem. As Isaacson puts it, “the desire to “move fast and break things” should not apply to people’s money.”
Read Ben Isaacson’s entire American Banker article on Connected Banking role in data protection.
Read what The Clearing House has to say about Connected Banking.