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Do Consumers Really Have The Right To Their Own Financial Data?

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Do Consumers Really Have The Right To Their Own Financial Data?

In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act was passed. It was a complex bill that included sweeping overhauls to a consumer’s legal right to his or her data, otherwise known as Section 1033. 

Years later, the Consumer Financial Protection Bureau (CFPB) is still figuring out the exact policy changes needed to truly make this a reality. Unlike other industry-specific provisions in the act, the consumer data aspect affects all business transactions and has proven tougher to implement. 

However, the CFPB is making moves to solidify consumer rights to their data in 2021. This is partly because of the rise of financial technology, or fintech, which relies heavily on data to bring consumers apps and websites that can manage financial transactions. Ensuring that the fintech boom is guided by clearly defined legal frameworks for protecting and providing consumer data on request is essential work for the future of the industry. 

Modern Money: Data, Consumers And Convenience

The rise of fintech has dramatically improved and increased access to products and services normally confined within the realm of traditional banking. Fintech has made ecommerce easier than ever, opened up the stock market to anyone with a smartphone, and proved to be a vital support relied on by the world economy in the midst of coronavirus lockdowns. 

Unfortunately, great success rarely comes without great sacrifice. The convenience and accessibility of fintech products inevitably hinges on the quick transfer of confidential financial data, which potentially puts consumers at risk. 

As the financial world becomes more tech-driven and data-focused, there is a big incentive for malicious hackers to attempt to steal information for their own profit. Many internet experts point out that cybersecurity has greatly progressed over the years, providing the sense of security users needed to have prior to embracing fintech applications. 

For example, automated DAST testing is regularly deployed within running applications to detect and solve security problems in real time before they are discovered by would-be cyber criminals. These sort of cybersecurity solutions were essential to ushering in the rise of fintech, because they gave consumers a sense of protection when entering sensitive data online. 

However, enhanced cybersecurity protection doesn’t change the fact that cyber crimes are at an all-time high. According to some reports, hacking attacks against banks have increased by 238% in 2020, partially fueled by opportunities posed by the coronavirus pandemic. With so much of our personal and financial data stored online, it’s easy to see why financial institutions have become easy targets for hacking. This is one of the many reasons why full ownership and agency over one’s own data is essential for staying protected in 2021. 

It’s easier said than done, though. One of the reasons the issue of consumer data is so convoluted is because there is uncertainty over who exactly is responsible for personal data once it is online. 

Fintech applications are generally third parties to data, with users signing over access to, for example, their bank accounts in order to gain the privilege of using the app. This data flow has become vital to the fintech boom, but to make matters even more confusing, many apps provide their services for free in exchange for non-sensitive data that they then sell to marketers. 

How Will Laws Enforcing Consumer Data Ownership Affect The Fintech Industry?

The question of who is responsible for handling consumer data, as well as how this will affect the emerging fintech industry, remains to be seen. The CFPB is requesting comments ahead of its critical rulemaking to ensure all voices are heard before making changes to consumer data protection rules. The issue of regulatory uncertainty with respect to Section 1033, as well as how this policy will affect the Fair Credit Reporting Act, are paramount in the discussion.

Consumers trust banks with their financial information, but sometimes don’t realize that this information can become compromised once fintech apps are allowed to access their accounts. Indeed, some financial institutions such as JP Morgan Chase & Co (NYSE: JPM) have such a high regard for the security of customer data that they have blocked applications like Venmo and other fintech apps from accessing bank information. 

Proponents of the fintech industry argue that this type of protectiveness over data is wrong, because it takes away the consumer’s choice about whether they want to provide their information to access the app or not. They also argue that this type of regulation could be a killer for their rapidly growing industry, of which the U.S. is currently a leader and plays a part in giving a much-needed boost to the economy. 

In any case, it’s clear that data will continue to play an important part of our everyday lives. Access to consumer data is what has caused tech giants like Facebook Inc (NASDAQ: FB) and Amazon.com Inc (NASDAQ: AMZN) to gain such a huge advantage against their competition. The convenience of banking and shopping online has increased dramatically since the onset of the pandemic, and will help fuel a new era of fintech services.    

Fintech is here to stay, but it must navigate an increasingly complex regulatory environment. These companies must show that they are willing to cooperate with consumers, federal agencies and financial institutions, some of whom may not be enthusiastic about their encroachment.

This is made even more difficult by the fact that specific rules regarding consumer rights to data haven’t even been decided upon yet, even after over ten years after the passing of the Dodd-Frank Act. Whatever policies are enacted in the future, it’s clear they must balance the rights of consumers with the future of the fintech industry in the U.S. to ensure that no one comes at the expense of the other.  

 

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