In our ‘Internet of Things’ era, consumers and online businesses engage in a continuous, invisible exchange of data every day. As any privacy-minded Internet user understands, however, the complexities of that exchange are nearly impossible to navigate – even on a one-to-one basis, with a trusted brand – since companies’ data collection and usage policies are often unclear.
Those complexities are only getting worse. As more and more third-party apps and programs “piggyback” from other platforms’ existing relationships with customers, companies are increasingly combating each other for the right to access and utilize user data.
Arguably, the top battleground of these “data wars” is in financial services – where large firms are beginning to take a hard line about keeping customers’ information all to themselves, rather than sharing it with upstart technology companies in the space.
Personal Financial & Consumer Data As a Commodity
Personal finance, financial planning, payments, and wealth management tools have been a top area for tech startup activity for years. A large number of today’s top fintech products and services – including popular consumer apps such as Mint, Betterment, and Venmo – rely on linked access to users’ bank, credit card, and retirement accounts.
The information they obtain by accessing those accounts is incredibly valuable to those fintech firms in two ways: From a marketing perspective, it can be leveraged to offer targeted, personalized offers (for loans, investment products, or related services) to individual users; and from a big-data perspective, it can be aggregated and used as business intelligence (or sold to another entity for related purposes).
Yet as the New York Times reported earlier this year, banks are growing more and more territorial of their customers’ data. Reportedly, large financial services firms are pushing to restrict data-sharing and are, in some cases, “refusing to pass along information, like the fees and interest rates they charge.”
Does the reticence share consumer data make the big banks, for once, the “good guys” when it comes to user privacy? Yes and no. Ostensibly, banks are right to be concerned about how their customers’ information is utilized.
“When you think about millions of customers handing over their bank account credentials to third parties, who currently have no real oversight or examination of their security controls, you start to understand why our members get pretty nervous,” Jason Kratovil, VP of Government Affairs for Payments at the Financial Services Roundtable, told the New York Times. (The Roundtable counts America’s leading banking, insurance, asset management, finance, and credit card companies as its members.)
But the real anxiety for banks has more to do with who will ultimately profit from the use of their customers’ information – the old guard, or the upstarts. To William Harris, founder of Bay Area startup Personal Capital, legacy banks’ shifting attitude to data-sharing is indicative of the threat posed by firms like his own: “It’s pretty clear the real intent of the banks is to limit this data because it puts their business model at risk,” he told the Times.
How banks will respond to that risk remains to be seen, but clearly, customer intelligence is a high-value commodity throughout the modern financial ecosystem. So regardless of how the “data wars” between banks and startups play out, consumers should pay heed to how significant their data is to the financial services entities they engage with via bank accounts, apps, or other digital avenues – and remember that it’s their choice whether or not to engage, in the first place.
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