The Clearing House Aims To Ease Data Sharing With FinTech Startups

THC Aims To Ease Data Sharing With FinTechs

The Clearing House, a payments firm owned by 25 of the biggest U.S. banks, is campaigning for contract terms that would give FinTech startups a way to quickly tap into consumers’ financial data, Bloomberg reported on Tuesday (Nov. 12).

The oldest U.S. banking association and payments company said it has developed a template for a data access agreement that would reduce a process that can take over a year to complete.

Banks including JPMorgan and Capital One are looking for an alternative to “screen scraping,” which generally asks customers for their usernames and passwords in order to share financial details.

After financial data leaves the bank, it is held by the startup, and “it’s really their responsibility to protect it,” Dave Fortney, executive vice president of product development at The Clearing House, told Bloomberg. “They’re the only ones that have control over that information at that point.”

The question of who is liable in the event of a breach is still being discussed. The proposed agreement indicates that data recipients should pay back lenders for expenses relating to a hack.

For proponents of open banking, the regulatory initiative seen in the U.K. and Europe is a natural progression from the surge in FinTech solutions offered to consumers, small businesses and enterprises. While policymakers target protection and customer ownership of data, one of the most prominent selling points for open banking is the ability for data to move seamlessly between once-siloed platforms.

In jurisdictions like the U.S. and Canada, where open banking regulations are not in place, financial service providers have to figure out a way to act on the demand to move data and connect platforms.

As banks and other players develop custom APIs to facilitate connectivity, even when not legally mandated to do so, other companies are deploying another strategy. Mergers and acquisitions have become a popular way for traditional financial institutions to acquire the technologies developed by smaller FinTechs, not only allowing FIs to build out their offerings but also eliminating the reliance on an API strategy to connect their platforms to third parties.


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