A handful of U.S. FinTech startups are creating an industry group to to be given the right for consumers to share their bank data with outside parties. According to a report, FinTech startups including Betterment, Kabbage and Ripple have joined Affirm, Envestnet | Yodlee and Varo Money to create the Consumer Financial Data Rights (CFDR) coalition, which argues that under the Dodd-Frank Act, consumers in the U.S. have the right to access their financial information via a third-party platform.
The report noted that the CFDR group wants data access through application program interfaces or APIs and wants the U.S. to follow the U.K., which is adopting an open banking standard. Singapore is also planning to launch an open API. The collation said it was focused on improving dialogue between FinTechs and banks. Banks have been against providing access to FinTechs, arguing it poses a security risk.
“The ability to freely access financial data empowers customers to take actions to improve their financial lives, whether it’s accessing capital to grow a business or better understanding their income streams. Access to financial data is not just vital for customers wanting to enjoy financial health, but it also allows companies to provide better user experiences,” said Rob Frohwein, cofounder of Kaabbage, in the report.
While banks have expressed security concerns with sharing data with FinTechs, consumers are embracing these startups wholeheartedly. In October, a survey by early-stage venture capital firm Blumberg Capital found that three in five Americans believe banks aren’t doing a good job of keeping up with their needs. Blumberg, which has invested in Able Lending, Addepar, Lendio, Fundbox, FeeX, EarnUp and CoverHound, found that 57 percent of Americans think traditional financial services companies won’t remain as they are today within their lifetime. What’s more, according to the survey, 75 percent of respondents said FinTech gives them more power and control of their finances, while 65 percent said FinTech gives them access to financial tools that were previously reserved for the wealthy. Of the survey respondents, 69 percent said FinTechs help everyone improve their financial state.