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FDATA North America Submits Comments to the Prudential Regulators’ RFI on Bank-Fintech Partnerships

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

Washington, DC, October 16, 2024 – The Financial Data and Technology Association of North America (“FDATA North America”), 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 comments to the Office of the Comptroller of the Currency (“OCC”), the Federal Reserve (“Fed”), and the Federal Deposit Insurance Corporation (“FDIC”; collectively, “the agencies”) in response to their Request for Information (“RFI”) on bank-fintech arrangements involving banking products and services. In the letter, FDATA North America expressed concern that the agencies’ RFI failed to appropriately capture or distinguish among the breadth of bank-fintech relationships and encouraged the agencies to recognize the diverse benefits these collaborations bring to consumers, small businesses, and the broader financial marketplace.

FDATA North America highlighted that bank-fintech arrangements provide essential services beyond traditional banking, including personal financial management, lending, and payments, thereby fostering competition, reducing costs, and expanding access to financial services for underserved populations. In the letter, FDATA North America urged the agencies to defer oversight of consumer-permissioned data access arrangements to the Consumer Financial Protection Bureau (“CFPB”), given the imminent finalization of the CFPB’s Personal Financial Data Rights rule. FDATA North America suggested that the agencies allow time for a thorough assessment of the CFPB’s final rule for all bank-fintech arrangements before considering further regulatory action.

A full copy of the letter is available here.

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FDATA North America October Newsletter

FDATA North America Monthly Newsletter for October 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 Department of Finance’s Consultation on Budget 2024 Measures. On September 4, 2024, the Financial Data and Technology Association of North America (FDATA North America) submitted a comment in response to the Canadian Department of Finance’s consultation on Budget 2024 measures to promote fairness across generations. FDATA North America’s submission emphasized the need to explicitly include small and medium-sized enterprises (SMEs) in Canada’s open finance regime, advocated for a tiered accreditation approach to support smaller market entrants while maintaining data security, urged the Financial Consumer Agency of Canada (FCAC) to maintain a focused role within the open finance ecosystem, and called for liability to be assigned to the responsible entity in the event of data breaches to ensure proper consumer and SME protection. FDATA released a statement on its submission of the letter, which can be found here.

Member News & Activity

FDATA North America members MX and Prism Data were featured in an American Banker article discussing the impact of the CFPB’s proposed open banking rule. MX’s Jane Barratt emphasized that institutions providing the best customer experience will have a competitive edge, while Prism Data’s Jason Rosen noted that the rule aims to level the playing field, but small banks need a solid strategy to fully benefit.

Codat was featured in The Fintech Times article highlighting the hesitation of US mid-sized businesses to move away from paper cheques despite increasing fraud risks, with projected losses exceeding $24 billion by 2024. Codat’s head of commercial banking, Charles Kreitler, emphasized that banks need to effectively communicate the benefits of digital payments, as businesses are becoming more concerned with security and are open to switching if digital methods offer strong fraud protection.

Envestnet Yodlee published insights from industry leaders and regulators on the opportunities, challenges, and consumer benefits of Open Banking in South Africa. The discussion highlighted the evolving regulatory landscape, new business opportunities for financial institutions, and the empowerment of consumers with greater financial control. The webinar also addressed the technical and operational challenges in implementing Open Banking frameworks in the region, emphasizing the potential for innovation and inclusivity in the financial ecosystem.

Fiserv published an article discussing how financial institutions can prepare for the upcoming CFPB open banking rule under Section 1033 of the Dodd-Frank Act. The article suggests four key actions: mapping data elements within the institution, consolidating data for efficient access, understanding current data-transfer uses to evaluate costs and benefits of implementing developer interfaces, and embracing the opportunities that open banking can bring for enhancing products and services. Fiserv emphasizes that the rule presents possibilities for improved efficiency and customer engagement beyond regulatory compliance.

GoCardless published a blog highlighting their “Instant Bank Pay” solution, which uses open banking to provide instant, low-cost, bank-to-bank payments for one-off transactions. This feature aims to reduce transaction fees, improve security, and offer a better customer experience compared to traditional payment methods like cards and bank transfers.

MX was featured in a Fintech Takes article, which explored the future of the financial data economy. The piece highlighted how MX’s solutions, particularly their data access and customer analytics platforms, enable financial services providers to seamlessly link and verify financial accounts. By transforming consumer-permissioned data into actionable insights, MX helps institutions create a comprehensive view of core banking, aggregated, and open banking data, allowing them to better analyze, engage with, and act on this information.

Plaid started a series on “The Age of Open Finance” with John Pitts, Head of Policy at Plaid, titled “Becoming the center of your customers’ digital financial lives.” The episode discusses the upcoming CFPB open banking rule under Section 1033 of the Dodd-Frank Act and how it will require financial institutions to provide secure access to consumer financial data via APIs, or “developer interfaces.” Pitts and Meredith Fuchs, Plaid’s Chief Legal Officer, emphasize that while compliance is essential, the real opportunity lies in positioning financial institutions as the hub for their customers’ entire digital financial experience, offering seamless access to popular apps and services.

Events and Submission Deadlines

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Video Member Spotlight: Inverite

This member spotlight features FDATA NA Spotlight with Karim Nanji, Chief Executive Officer, Inverite. Karim discussed how Inverite’s AI-powered technology is transforming the financial landscape in Canada.

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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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Morningstar Wealth’s Brian Costello on Potential Untapped Industries

Before we address untapped industries outside the financial space, it is important to note that the wealth management use cases have not yet received sufficient attention in the design and implementation of open banking/finance in the US and Canada. Current initiatives are almost exclusively focused on retail banking use cases for personal financial management (PFM), lending and payments—with asymmetric and incomplete coverage of investing, advice, education, and retirement related use cases. These issues are insufficiently addressed by the current Consumer Financial Protection Bureau’s NPRM of the Dodd-Frank Act Section 1033: lacking support by providers and technical standards organizations for delegated access in the consent and authentication flows, inconsistent data parity by providers who do publish APIs, and prohibitions on screen-scraping by those that don’t publish APIs without alternative access solutions.

There also exists an unfair characterization that wealth management use cases are only for the rich, rather than for everyday workers, retirees, and their families who need to prepare for and live fruitful and dignified lives. Saving for and funding education, caring for elderly or disabled family members, and ensuring a safe retirement are more prevalent needs than those of the ultra-high-net worth

The CFPB and the SEC should join forces to ensure a unified data sharing ecosystem that will also support the SEC’s Reg-BI to ensure advisors’ fiduciary duty.

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FDATA’s Walter Pereira on Potential Untapped Industries

In Latin America, data openness can contribute not only to the financial sector but also to other sectors, such as telecom, healthcare, and delivery services, for example. One sector that has been advancing in the implementation of open data infrastructures is insurance in Brazil. The implementation will allow for the customization of policies based on more detailed financial profiles and greater efficiency in contracting. However, unlike Brazilian Open Banking, Open Insurance faces some challenges in terms of schedule and technology in the country.

Additionally, there are sectors that have not yet been widely explored when it comes to the potential of data openness. The energy sector, for example, could use financial data to offer more personalized tariffs or energy efficiency programs based on detailed consumption analyses. The agricultural sector is also a promising candidate, where financial data could be used to create more suitable financing solutions for small producers, improving access to credit. There are many challenges in this regard, from the lack of organized discussions to explore the topic to regulatory and governance impasses. I believe that in sectors beyond the traditional ones, we will first see initiatives being created and driven by the market, followed by regulatory movements.

We can learn a lot from Brazil’s Open Finance and the British model itself in terms of governance, technological standards, and adoption strategies. It is very likely that we will see interesting intersections emerging in the coming years, in a much shorter time than we saw in the financial sector. However, we still face challenges in measuring the return on investment and creating use cases that are truly beneficial for all parties involved.

 

 

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Xero’s Mike Cascone on Potential Untapped Industries

Focusing on individual use cases for open banking risks material small business productivity gains. We often hear of the one-off open banking use cases for individuals: sharing data with a broker to secure a home loan or comparing banking products to find the most competitive rate, for example. Designing open banking with these consumer processes as the primary open banking use case risks the viability of sharing data for extended periods of time.

Open banking is incredibly important for small businesses, especially small businesses operating on thin profit margins. Being able to securely share transaction data with accounting software via open banking means small businesses can understand their financial position in close to real-time. Visibility of looming cash challenges means small businesses can proactively assess and manage their options. Small businesses should be central to the development of open banking regulation.

 

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FDATA’S Ghela Boskovich on Potential Untapped Industries

Governments around the world have recognised that data-sharing economies are the next building block for economic growth, and ultimately better outcomes for end consumers. We’ve seen this with the adoption wave of open banking and finance, where each week seemingly brings an announcement that another country has published its regulatory framework to open up banking and financial data. Of course this isn’t limited to just financial data; similar initiatives are happening in the energy, telecomms, transportation, retail, and health sectors.

However, these sectors are at the very beginning of their respective journeys, and at very different levels of readiness. One industry prime for opening up data sharing is the energy sector. The immediate benefits of optimising switching, grid distribution, and pricing are waiting to be realised. But one use case that would have profound effects on cutting carbon emissions actually relies on not just energy data, but financial data, too: automating emissions reporting to improve access for SMEs to green finance.

In the UK, Project Perseus is undertaking to do just that. A collective of banks, cloud accounting platforms, carbon accounting firms, and energy companies are working to bring this to life. Like any data sharing framework, the complexities of the liability model, the technical and data standards, the scheme rulebook, and the digital verification, consent and trust frameworks take time to sort. However, because open banking provides a starting template, work on this is happening at pace. In fact, it’s moving more quickly than the legislation underpinning the smart data framework that would formalise the broader, multi-sector data sharing economic model government is sponsoring.

While the energy sector is touted as the next industry to be opened up, it hasn’t yet been tapped in the same way banking and finance has. But regulators and policymakers are working to make it happen: for example, Ofgem, the UK Energy regulator, just published its consultation on the consumer consent solution as part of its broader Data Sharing in a Digital Future initiative, which will be interoperable with open banking and the long-term regulatory framework that will take shape for the UK’s Smart Data scheme.

We’re now seeing other sectors applying lessons learned from open banking in order to tap into the potential their sector data sharing will bring.

 

 

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FDATA’S Steve Boms on Potential Untapped Industries

When discussing potential untapped industries that could benefit from open banking and financial technologies, financial advisors stand out. Traditionally, fintech tools have been associated with direct consumer use; however, technology platforms can play a critical role in enabling financial advisors, to support and manage their clients’ financial wellbeing. The primary benefit of fintech platforms for financial advisors lies in their ability to provide comprehensive financial oversight and personalized advice. Advisors can use fintech tools to gain a holistic view of their clients’ financial situations by accessing various accounts and financial data securely. This access allows advisors to craft tailored financial strategies that align with their clients’ specific goals and circumstances. The fintech tools enable automation of portfolio rebalancing, optimization of tax strategies, and real-time tracking of investment performance. These capabilities ensure that advisors can offer precise, timely, and effective advice, significantly enhancing their clients’financial outcomes. One of the significant advantages of leveraging fintech tools is the enhancement of financial advisors’ ability to manage clients’ portfolios continuously. This ongoing management leads to better long-term financial outcomes by ensuring that investments are always aligned with the clients’ goals and market conditions. Fintech tools also allow advisors to efficiently identify opportunities for tax optimization, enabling their clients to save more and grow their wealth more effectively. Moreover, real-time data access and analysis empower advisors to make informed decisions quickly, providing their clients with the best possible financial strategies. Upcoming initiatives, particularly the United States’ Consumer Financial Protection Bureau (CFPB) finalizing the Section 1033 rule this fall, will enable consumers and small and medium-sized enterprises to have the legal right to share their balance and transaction information from any and all of their Regulation E debit and Regulation Z credit accounts.

However, the rule’s scope of accounts must be broadened to include broke rage and retirement accounts, and other critical financial accounts, to ensure that consumers can access and share their financial data digitally with their advisors and benefit from important protections when they do so. Ensuring consumers have the same agency over data held in these accounts is crucial for maintaining a fair and inclusive financial ecosystem.

Across the border, Canada’s Consumer-Driven Banking Framework already includes brokerage accounts, giving Canadian advisors secure and efficient access to their customers’ complete financial profiles. This advanced framework highlights a significant difference from U.S. regulations, enabling Canadian consumers to share their financial information with advisors more comprehensively, thereby enhancing their financial well-being.

To align with the comprehensive approach seen in Canada, expanding the scope of the U.S. Section 1033 rule to encompass all types of credit and non-credit accounts, is essential for providing robust data privacy and security protections. An expansion of the proposed rule’s account scope would enable consumers to benefit fully from fintech platforms and services. By granting financial advisors’ full access to a broader range of financial data, these initiatives will empower advisors to deliver more comprehensive and personalized financial advice. Ultimately, this will enhance the financial wellbeing of their clients, allowing more consumers to achieve their financial goals through professional guidance and advanced technological tools.

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