Consumers Will Have More Power Over Their Financial Data
For comparison, he cited the Federal Communications Commission’s cellphone number portability rule, now almost 20 years old, which made it easier for consumers to switch cell carriers by letting them take their phone numbers with them.
“This jump-started more competition in the market,” he said. “These and other successful examples of regulation that decentralizes market power are guiding our financial data rights rulemaking.”
Under the new rules, financial institutions would be required to share consumers’ financial data, at the data consumers’ request, with third parties and with consumers themselves. That often happens today, for example, when consumers sign up with so called “aggregators” such as the personal finance service Mint, but the availability and currency of the data varies by financial institution because some institutions “play games,” Chopra said.
If new rules can make incumbent institutions behave more consistently, consumers will gain bargaining leverage. “This will lead to more shopping by consumers, both because they have the leverage to walk away and because they will have access to more tailored products and services,” Chopra said.
Switching Banks Will Get Easier, and Upstart Firms Will Benefit
Today, a consumer who switches banks loses all of his or her account history, a big disincentive for doing so. But imagine if your checking account history could be as portable as your cellphone number. “Americans often use their deposit account history as a life ledger. It is a written record that keeps track of payments and deposits, which can be helpful for taxes, for disputes with merchants or insurers, and for other purposes,” Chopra said. “By allowing consumers to transfer their ledger to a new institution, the rule could make switching institutions easier.”
The new rules would benefit upstart financial services firms, including fintechs, who strive to woo customers with new services, Chopra argued. Fintechs attending Money20/20 seemed to agree.
“I actually see this as a very strong positive,” said Salman Syed, COO of Fidel API, a company that enables companies to build “programmable experiences,” such as for rewards and loyalty programs, whenever a transaction occurs on a payment card. Syed was speaking at a separate panel on open banking. “There are a lot of details to be worked out in terms of how for the CFPB wants to go, but it’s important that they trigger this.”