Author: rebecca

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Plaid’s Open Banking Use Cases

Plaid: Open Banking Powers Consumer Choice and Flexibility in Money Management

Open banking is transforming how consumers manage their finances by offering unparalleled choice and flexibility. With the CFPB’s forthcoming 1033 rule, these benefits are poised to extend to all consumers, ensuring they can securely connect their financial data no matter where they bank or which financial app they prefer. Companies like Plaid are at the forefront of this movement, enabling secure, seamless connections between financial institutions and the apps consumers rely on daily.

Today, 8 in 10 consumers use a fintech or digital finance app or service, highlighting the growing reliance on these platforms. Nearly half of these users engage with 3-4 fintech apps, with payment services leading the charge. What’s more, 20% of consumers anticipate using 6 or more fintech apps in the next six months, demonstrating a clear trend toward diverse and personalized financial management.

Connectivity stands at the heart of this ecosystem, and Plaid plays a crucial role in making this possible. A significant 63% of consumers say they would consider switching banks if their primary bank failed to connect with other financial apps. This figure marks a 12% increase since 2020, underscoring the critical role that seamless connectivity plays in maintaining customer loyalty.

As open banking continues to evolve, its ability to empower consumers with more choices and greater control over their finances remains at the forefront. The CFPB’s 1033 rule can play a pivotal role in reaffirming these benefits, ensuring that consumers can freely and securely access the financial services that best meet their needs.

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Propel’s Open Banking Use Cases

Propel: Empowering Low-Income Households Through Open Banking

Open banking is a powerful tool for improving financial health, especially for low-income households that rely on public benefits. With the CFPB’s forthcoming 1033 rule, companies like Propel are poised to make a significant impact by providing easier access to financial data, helping households manage their limited resources more effectively, and protecting against benefits theft.

Improving Financial Health for Low-Income Households

For many low-income households, budgeting and planning are daily challenges, particularly when using EBT accounts for public benefits. These accounts, much like low-dollar bank and debit card accounts, are often spent down to $0 each month. With such thin financial margins, it’s essential for these households to know their account balances to the penny and to the minute. Propel’s services, which could be further enhanced by the CFPB’s 1033 rule, make this possible by giving consumers easier access to their own financial data. This empowerment allows households to better budget, plan, and stretch their benefits, ensuring that every dollar is accounted for and utilized effectively.

Detecting EBT or Benefits Theft

In addition to helping with budgeting, Propel’s platform plays a crucial role in safeguarding low-income households from the growing threat of EBT fraud and public benefits theft. Unlike credit card holders, who benefit from banks monitoring suspicious activity, EBT cardholders are often left to fend for themselves. Propel’s tools, combined with the expanded data access that the CFPB’s 1033 rule would provide, empower these households with access to detailed historical data. This data is critical for identifying out-of-state or unrecognized transactions, which are often indicators of fraudulent activity. As EBT fraud has become increasingly prevalent over the past two years, the need for reliable electronic data access to identify and address fraudulent transactions has never been more urgent.

Looking Ahead: The Role of the CFPB’s 1033 Rule

As the CFPB moves forward with its 1033 rule, the potential to enhance financial security and health for low-income households grows. Propel’s use cases demonstrate how critical access to financial data is for these vulnerable populations. By ensuring that all consumers, including those with EBT accounts, have the tools they need to manage their money and protect themselves from fraud, the CFPB can help create a more equitable financial landscape.

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Video Member Spotlight: Inverite

This member spotlight features FDATA NA Spotlight with Karim Nanji, Chief Executive Officer, Inverite. Karim explains that Inverite helps address a major industry challenge – the lack of alternative data to serve credit invisible and non-prime consumers. 

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Video Member Spotlight: Envestnet Yodlee

This member spotlight features FDATA NA Spotlight with Kat Cloud, Principal Director Open Banking Compliance, Envestnet Yodlee. In this interview, Kat emphasizes the importance of consumer-permissioned data in driving innovation; how Envestnet’s platform is helping advisors provide more holistic financial advice; and the impact of open finance on improving financial inclusion and wellness for all consumers.

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FDATA North America Submits Comments to the Department of Finance’s Consultation on Budget 2024 Measures

Contact: Laine Williams, (202) 897-4757,  [email protected] 

September 4, 2024, Washington, DC – The Financial Data and Technology Association of North America (FDATA), a consortium of more than 30 financial technology companies providing consumers and small- and medium-enterprises with innovative financial products, services, and tools, today submitted a comment in response to the Canadian Department of Finance’s consultation on Budget 2024 measures to deliver fairness for every generation.

In our submission, we urged the Department of Finance to:

  1. Ensure All Small and Medium-Sized (“SME”) Accounts Are Included: It’s crucial that SMEs are explicitly included in the scope of Canada’s open finance regime, ensuring they can benefit from innovative financial solutions.
  2. Mitigate Barriers to Entry for Smaller Participants: We advocate for a tiered accreditation approach that balances rigorous data security requirements with the need to support smaller market entrants, fostering innovation and competition.
  3. Maintain a Focused FCAC Mandate: The Financial Consumer Agency of Canada (“FCAC”) should maintain a clear and manageable role within the open finance ecosystem, avoiding an overly broad expansion of responsibilities.
  4. Assign Liability to the Responsible Entity: Liability should rest with the entity responsible for any data breaches, ensuring that consumers and SMEs are protected and compensated fairly.

A full copy of the comment is available here.

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FDATA North America September Newsletter

FDATA North America Monthly Newsletter for September 2024

Welcome to FDATA North America’s monthly newsletter! These regular dispatches will share developments from our organization and our 30+ member companies, all of which are promoting financial access and inclusion with open finance use cases. We also include a list of upcoming industry events, and coverage of any market developments that impact fintech innovators. Know someone who’d like to receive these monthly updates? Send them here to sign up.

FDATA North America News

FDATA North America Submits Comments to the CFPB’s Medical Debt Rule. On August 5, 2024, the Financial Data and Technology Association of North America (FDATA) submitted a comment in response to the Consumer Financial Protection Bureau’s (CFPB) proposed rule aimed at limiting creditors from using information on medical debts for credit eligibility determinations under the Fair Credit Reporting Act (FCRA). While FDATA North America did not take a position on the rule’s underlying merits, it raised significant operational concerns regarding the practical implementation of the rule for consumer-permissioned open banking platforms that function as Consumer Reporting Agencies (CRAs). FDATA North America emphasized that without a mandatory requirement for data providers to identify medical debts, the current lack of a uniform mechanism for open banking platforms to identify whether an account connected by a consumer is a medical debt presents a major compliance challenge. To comply effectively with the CFPB’s proposed rule, FDATA North America urged the Bureau to require lenders to affirmatively identify accounts as medical debts whenever consumers grant data access to third-party platforms. This requirement is crucial for ensuring that open banking platforms, regulated as CRAs, have access to the same account information available in the traditional CRA space. FDATA released a statement on its submission of the letter, which can be found here.

Member News & Activity

ByAllAccounts published a blog discussing how the rapidly evolving wealthtech landscape offers opportunities for financial advisors and wealth management firms, despite the challenges posed by a fragmented tech ecosystem. The ByAllAccounts Data Network provides a streamlined solution by simplifying data exchange and integration, allowing wealthtech platforms to focus on innovation and growth rather than the complexities of data management.

Flinks published a blog summarizing a live session on building an efficient payments strategy by balancing cost, risk, and conversion. The session highlighted the fragmented payments landscape in Canada and emphasized the importance of finding the right balance between these three pillars to optimize payments strategy, with insights on future trends and advancements in payment technologies.

MX published a blog emphasizing the importance of secondary use cases in consumer financial health, particularly in light of the CFPB’s upcoming rule under Section 1033. The blog highlights concerns from a bipartisan group of Congress members about the potential negative impacts of restricting secondary data use, including stifling innovation, limiting fraud prevention, and disadvantaging smaller institutions.

Plaid published a blog highlighting five ways its open banking platform simplifies international expansion between Europe and North America. The blog emphasizes Plaid’s consistent APIs, extensive financial institution coverage, regulatory compliance, localized support, and scalable infrastructure, all designed to help fintech companies efficiently navigate and succeed in new markets.

Pontera posted a blog emphasizing that market volatility provides an opportunity for financial advisors to actively manage clients’ retirement plans and investment portfolios. The blog highlights the importance of proactive management during uncertain times, particularly as the market is expected to fluctuate leading up to the presidential election, ensuring that clients stay focused on their long-term financial goals.

Propel announced that its app, Providers, has been rebranded to align with the company’s name, now both known as Propel. This rebrand marks a decade of growth and innovation, reflecting Propel’s ongoing mission to support low-income Americans with tools like the Propel Card, Benefits Hub, and Job Board, all while continuing to advocate for financial security and dignity for their users.

TransUnion published a blog announcing its partnership with Snowflake to launch TruIQ Data Enrichment on the Snowflake Marketplace, providing on-demand access to pseudonymized TransUnion credit data within the Snowflake AI Data Cloud. This partnership enables organizations to efficiently link credit data with first and third-party datasets, enhancing data-driven insights while maintaining data security and minimizing data movement across platforms.

Trustly’s Founder and CEO, Alexandre Gonthier, wrote an op-ed featured in the American Banker, where he expressed concerns about the CFPB’s proposed Section 1033 rule, particularly the inclusion of tokenized account numbers (TANs). Gonthier warned that TANs could create barriers for smaller financial institutions, increase fraud risks, and lead to consumer confusion. He urged the CFPB to reconsider the inclusion of TANs to protect competition, consumer choice, and the security of financial transactions.

ValidFi posted a blog discussing the challenge of balancing customer experience with fraud prevention in today’s competitive landscape. The blog emphasizes the importance of using layered fraud protection solutions while clearly communicating the benefits to customers, ensuring they feel secure and understand the value of sharing their personal information.

Events and Submission Deadlines

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ByAllAccounts’s Open Banking Use Cases

ByAllAccounts: How Open Banking Enhances Wealth Management

Open banking is revolutionizing the wealth management industry by providing greater access to financial data, which empowers both investors and their advisors. ByAllAccounts is at the forefront of this transformation, leveraging open banking to enhance investor insights, support fiduciary responsibilities, and streamline compliance of suitability performance reporting requirements. With the CFPB’s 1033 rule on the horizon, these benefits have the potential to become even more accessible across the financial ecosystem once investment data is included.

Investor Insights: A Clearer View of Investments

For investors (and their advisor), having a comprehensive understanding of the performance and composition of their investments and retirement programs is crucial for making informed decisions. ByAllAccounts enables this by aggregating data from various financial accounts, providing a unified view of an investor’s portfolio. This clarity allows investors to track their financial goals more effectively, ensuring their investment strategies remain aligned with their long-term objectives.

Fiduciary Enhancement: Supporting Advisors in Their Roles

Advisors play a critical role in managing their clients’ financial wellbeing, and open banking will enhance their ability to fulfill this responsibility. ByAllAccounts equips advisors with essential data, allowing them to gain a deeper understanding of their clients’ financial situations. This data-driven approach not only strengthens the advisor-client relationship but also helps advisors meet their fiduciary obligations by making well-informed, client-centric decisions. By having a holistic view of their clients’ assets, advisors can offer more personalized and effective advice.

Suitability Compliance: Simplifying Regulatory Adherence

Compliance with suitability rules is a key aspect of wealth management, ensuring that investment recommendations align with a client’s financial profile and regulatory standards. ByAllAccounts simplifies this process by providing access to detailed financial data, making it easier for advisors to verify that their investment strategies are suitable for each client. This streamlined approach to compliance not only protects clients but also reduces the administrative burden on advisors, allowing them to focus more on their clients’ needs.

The Future of Wealth Management with Open Banking

As the CFPB prepares to implement the 1033 rule, the potential for open banking to enhance wealth management is becoming increasingly apparent. ByAllAccounts exemplifies how access to financial data can empower both investors and advisors, leading to better financial outcomes and stronger client relationships. With open banking, the wealth management industry can become more transparent, efficient, and client-focused, benefiting all stakeholders involved.

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Betterment’s Open Banking Use Cases

Betterment: How Open Banking Enhances Goal Projections and Risk Analysis

As a leading digital investment advisor, Betterment leverages open banking to provide clients with more accurate financial guidance. Here’s how open banking can further enhance the services Betterment offers:

Enhanced Goal Projections:

Betterment offers savings and withdrawal advice by projecting returns and volatility for assets in client accounts. With the help of Plaid, clients can link external accounts—like investing, cryptocurrency, checking, and savings accounts—to their financial goals. These linked accounts allow Betterment to deliver a more comprehensive view of whether clients are on track to meet their goals. As open banking expands through policies like the CFPB’s 1033 rule, linking external accounts will become even easier, leading to more precise and personalized financial advice.

Improved Risk Analysis:

Betterment also provides advice on asset allocation and risk management tailored to client goals. By analyzing the risk levels of both Betterment and linked external accounts, clients receive feedback on whether their risk exposure aligns with their financial objectives, such as retirement or emergency funds. Open banking will further refine Betterment’s risk analysis by enabling access to more detailed and reliable information from clients’ external accounts, ensuring that investment strategies are well-informed and appropriately balanced.

As open banking continues to evolve, Betterment remains committed to offering clients enhanced financial insights and more accurate, data-driven advice, empowering them to achieve their financial goals with confidence.

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FDATA North America August Newsletter

FDATA North America Monthly Newsletter for August 2024

Welcome to FDATA North America’s monthly newsletter! These regular dispatches will share developments from our organization and our 30+ member companies, all of which are promoting financial access and inclusion with open finance use cases. We also include a list of upcoming industry events, and coverage of any market developments that impact fintech innovators. Know someone who’d like to receive these monthly updates? Send them here to sign up.

FDATA North America News

FDATA North America Responds to the CFPB’s BNPL Interpretive Rule. On July 24, 2024, the Financial Data and Technology Association of North America (FDATA) submitted a letter to the CFPB’s interpretive rule classifying Buy Now, Pay Later (BNPL) loans as Regulation Z-regulated products under the Truth in Lending Act. FDATA commends the CFPB for including BNPL loans as “covered data” under the forthcoming Section 1033 rule of the Dodd-Frank Wall Street Reform and Consumer Protection Act, enabling consumers and small and medium-sized enterprises to share their balance and transaction information with third parties, enhancing financial transparency and empowerment. This classification will help consumers make informed financial decisions and better manage BNPL loans. FDATA also urges the CFPB to expand the types of accounts covered under Section 1033 to ensure all consumers can access and share their financial data with robust privacy and security protections. FDATA released a statement on its submission of the letter, which can be found here.

FDATA North America Submits 2025 Pre-Budget Submission to Canadian House of Commons’ Standing Committee on Finance. On July 26, 2024, the Financial Data and Technology Association of North America (FDATA) submitted recommendations to the Canadian House of Commons’ Standing Committee on Finance (FINA) for the 2025 budget, emphasizing the need for the rapid and well-governed implementation of Canada’s open banking system and its expansion into an open finance framework. FDATA urged the Canadian government to include language in Budget 2025 to ensure open banking implementation, outline the approach to open finance, and ensure that the Financial Consumer Agency of Canada (FCAC) governs the system in a way that does not dissuade smaller entities from participating. FDATA highlighted the importance of Budget 2024’s delivery of the initial CDB framework and called for Budget 2025 to ensure delivery of open banking, including small business accounts in the first phase, and appropriately tier FCAC enforcement based on size, complexity, and use case. FDATA released a statement on its submission of the letter, which can be found here.

Member News & Activity

Basis Theory published a blog highlighting the benefits of tokenization for merchants, emphasizing improved security and reduced friction in purchase processes. However, they also outlined five pitfalls to avoid, such as using the wrong kind of token, neglecting programmability and storage, misunderstanding maintenance obligations, ensuring PSP compatibility, and managing underlying data properly.

Envestnet hosted their Data Driven Finance Podcast with Steve Boms, Executive Director of FDATA NA, where he explained that having existing data privacy frameworks in place for financial services enables the advancement of open data ecosystems like open banking, as seen in markets such as Canada, where consumers are granted a fundamental data portability right. Steve noted that Financial services organizations should strategically position themselves to leverage this framework for improved user outcomes and ensure compliance with upcoming regulations to interact with this data.

Method was featured in BAI with their op-ed discussing the integration of open banking into traditional bank branches. They highlighted how Personal Identifying Information (PII) authentication can bring the efficiency of digital banking to in-person transactions, enhancing the borrower experience. Despite the rise of digital banking, brick-and-mortar locations remain crucial for financial equity, especially for marginalized populations.

MX posted a blog highlighting the transformative potential of AI in banking. Key opportunities include enhancing data analysis for smarter insights, improving operational efficiencies, promoting financial inclusion, advancing fraud detection, and delivering personalized customer experiences at scale.

Pontera published a blog emphasizing the increasing need for personalized, professional 401(k) guidance as more Americans rely on 401(k) plans for retirement income. Research shows that professional advice significantly improves financial outcomes, with many savers feeling more confident about meeting their retirement goals when supported by advisors.

Plaid published a blog outlining their solutions for data providers to prepare for the upcoming Section 1033 regulation, which will enhance consumer protection and promote financial transparency in the open banking ecosystem. Their offerings, including Core Exchange, Permissions Manager, and App Directory, aim to simplify compliance, improve data connectivity, and meet consumers’ expectations for secure and efficient digital financial experiences.

Trustly was featured in a PYMNTS article discussing its partnership with Lenovo to offer open banking at checkout for customers in the U.K. and continental Europe. This partnership provides a more secure and cost-effective payment method, allowing direct bank account payments with lower fraud rates and instant refunds, compared to traditional debit and credit card transactions.

VoPay CEO Hamed H. Arbabi was featured on the Leaders in Payments Podcast, where he highlighted two pivotal changes shaping the future of payments. He emphasized the seamless integration of payments into various industries, making them autonomous and embedded within software, and the unification of payment rails, allowing for easier global access across different payment methods under unified service providers.

Events and Submission Deadlines

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FDATA North America Submits Comments to the CFPB’s Medical Debt Rule

Contact: Laine Williams, (202) 897-4757,  [email protected] 

August 5, 2024, Washington, DC – The Financial Data and Technology Association of North America (FDATA), a trade association representing more than 30 financial technology companies and consumer-permissioned data access platforms in Canada and the United States, today submitted a comment in response to the Consumer Financial Protection Bureau’s (“CFPB” or “Bureau”) proposed rule to limit creditors from obtaining or using information on medical debts for credit eligibility determinations under the Fair Credit Reporting Act (“FCRA”).

While FDATA North America takes no position on the underlying merits of the CFPB’s proposed rule, it raised significant operational concerns about the practical implementation of the rule for consumer-permissioned open banking platforms that function as Consumer Reporting Agencies (“CRAs”). FDATA North America underscored that absent an affirmative requirement for data providers to identify medical debts as such, the current lack of a uniform mechanism for open banking platforms to identify whether an account connected by a consumer is a medical debt presents a major compliance challenge.

FDATA North America highlighted that for open banking platforms to comply with the CFPB’s proposed medical debt rule, it is essential that lenders affirmatively identify accounts as medical debts whenever a consumer grants data access to a third-party platform. Without this requirement, platforms will struggle to determine with certainty whether an account is a medical debt, leading to compliance challenges with the Bureau’s proposed rule.

FDATA North America called for the CFPB to mandate that data providers within consumer-permissioned ecosystems disclose the type of account from which the consumer is seeking to share data to ensure effective compliance. This measure would ensure that open banking platforms, when regulated as CRAs, have access to the same account information currently available in the traditional CRA space.

A full copy of the letter is available here.

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