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US: PNC blocks Venmo, tells users to Switch to Zelle

 |  December 16, 2019

In financial services, access to data is, well, everything.

Financial institutions, of course, use data to create new products and services to cement customer loyalty.  FinTechs can use data to leapfrog FIs in their own arms race to develop new offerings and gain mind share and wallet share.

Might the withholding of data be a strategic weapon?

The Wall Street Journal reported this weekend that FinTech firms have been accusing banks of blocking access to end users’ financial data.

In one example, PNC Bank clients stated that they were unable to connect accounts to Venmo, the payment service owned by PayPal.

And according to tweets from PNC, the bank has suggested that those Venmo users switch to Zelle, the payments offering that is run by Early Warning Systems, in turn owned by a consortium of banks — including PNC.

“We’ve made some security enhancements which may be causing difficulty when attempting to link your PNC acct with Venmo. If you are having this difficulty, you may want to explore alternative means of money movement, such as Zelle, or work directly with Venmo on other options,” said PNC.

Venmo urged affected customers to tweet complaints, suggesting that they tweet, “Hey PNC Bank…Let me use the financial service apps I need!”

The tug of war represents the delicate data dance.  Banks hold the data.  FinTechs need the data.  This time around, PNC has prevented Plaid –  the data aggregator that connects apps including Venmo to FIs – from accessing end-user data, such as routing information.

Data Wars, Via Social Media

Welcome to the data war, certain to bring a closer look at who owns what, how, and whether it must be distributed — and to whom.

The war may be waged across social media, where reputations can be dented in a matter of short Twitter bursts.   We note that consumers may not understand – or care – why companies may be feuding.  They simply want the services they need to be delivered on demand, and seamlessly so.

The battle this time seems joined over security, as PNC, reported the Journal, said that data aggregators have been blocked from bank customer access because “multiple different aggregators” have attempted to sidestep PNC security protocols. The Pittsburgh Post-Gazette reported that of PNC’s 6.5 million online banking customers, about 14 percent use apps that are supported by Plaid.

“When aggregators access account numbers, many store them indefinitely, often unbeknownst to customers. This puts customers and their money at risk,” said Karen Larrimer, PNC’s head of retail banking and chief customer officer. “We want to make sure we know who is setting up the account.”  Plaid has said it has gone on to provide system updates.

The very premise of data sharing has its promise.  Banks and FinTechs have a vested interest in moving past screen scraping, where apps get access to data as customers use passwords and usernames…which of course opens up vulnerabilities that can be exploited by hackers and fraudsters.

Even as Open Banking gains traction abroad, there have been a few variations on how data sharing is evolving in the United States.

As noted in this space, Open Banking has helped thaw at least some of the traditional impasse between FIs and FinTechs.  Earlier this month, Envestnet | Yodlee said it signed a data sharing agreement with JPMorgan Chase. The companies said in a joint announcement that JPMorgan Chase customers will be able to connect with and send financial information to more than 1,200 third-party applications across the Envestnet | Yodlee platform.  The pact will not require storing usernames or passwords on that platform. The announcement with JPMorgan follows a pact with Citigroup earlier in the year. And last month, The Clearing House announced the debut of a template that can help banks and FinTechs ink data access pacts.

But the tiff with PNC — and the promotion of Zelle over Venmo — spotlights the fact that, at least in the U.S., the lack of a uniform mandate (and deadline) for data sharing means that at least sometimes, data access, or lack of it, can be used strategically.  Promoting one service at the expense of another, which has been (even temporarily) blocked, can be a slippery slope.  Restricted access may indeed steer customers toward where you want them to go once you suggest an alternative — or they may vote with their feet.  It’s a strategy that may backfire.