Data sharing — and open banking — are due for a quantum leap forward in the United States.
Traditionally, permissioning, collecting and sharing data has been a laborious process. Screen scraping has been the norm when bank customers have wanted to interact with third-party apps, requiring consumers to share banking credentials such as their usernames and passwords to enable access to their accounts. Consumers have had to trust that their data is being safeguarded — and sharing credentials has been a friction-filled activity. Frustration has been a hallmark, Wilcox said.
“If this connectivity breaks, the customer calls the bank,” he said. “The bank is limited in how it can repair or restore that connectivity because the customer may have changed a password, or a banking upgrade has taken place.”
Better connectivity and consumer trust would improve the experience on both sides, ignite open banking in the U.S., and do much to satisfy looming regulations from the Consumer Financial Protection Bureau (CFPB), yet to be finalized, that will govern data permissioning and sharing, he said.
Fiserv and Plaid have partnered to streamline connectivity as banks share data with outside entities. The joint efforts center around the use of APIs to directly connect Fiserv’s client base of more than 3,000 hosted financial institutions to Plaid’s 8,000 third-party applications and services.
At a high level, said Wilcox, “there’s not been an announcement like this in the marketplace,” and it’s one that reduces the work that Plaid must tackle to maintain connectivity to those thousands of FIs. Fiserv has already had the components in place — and experience as a data aggregator — to lay the foundation of that connectivity.
In terms of the mechanics, the FI itself, he added, does not have to do the “heavy lifting” to share data securely, reducing fraud and friction as data and accounts are continually verified. There’s a single point of access to the Plaid network through Fiserv’s AllData Connect. AllData Connect is a “middle layer” that resides between the bank, Plaid and the application they’re powering.
For the all-important consumer side of the relationship, said Wilcox, “they want to use the application, and they want to get that data into the applications. This announcement gives the consumer the ability to do that without sharing credentials.”
Wilcox told Webster that one of the most meaningful aspects of the announcement is that it gives individuals a level of control over data sharing that had heretofore been lacking:
“The consumer has the ability to grant and revoke [data] access at an application level,” he said.
That granular level of permission lets a consumer in the midst of a hypothetical mortgage application powered by Plaid share only certain details with the mortgage company through the process, and then revoke access as soon as the application journey is over, he said.
Those same consumers are likely to associate the data access and control with their FIs rather than with Fiserv and Plaid running things in the background, observed Wilcox. That means they’ll likely cement their trust in their chosen FIs as they opt to share their info with Venmo but not with Robinhood, for instance, and they will have the flexibility to come back and add Robinhood later if they change their mind.
“We do think this is going to open up other use cases” in open banking, said Wilcox, who pointed to the fact that existing data-sharing relationships with Akoya, Finicity and MX are helping extend data sharing across 100% of Fiserv’s FIs and 100% of consumer accounts.
Asked by Webster how the coming CFPB regulations might impact the Plaid/Fiserv initiative, Wilcox stated that “we wanted to build where we believed the standards were going to be. It’s the old adage of skating to where the puck’s headed. We believe that this [partnership] will conform to the standards.”
As he told Webster: “We’re firm believers in open banking. We’re firm believers in open data, and we’re firm believers in the standards that are going to be set for the U.S. financial industry. This is a way to comply with those standards, give consumers control — and do it all at scale.”