This member spotlight features FDATA NA Spotlight with Kat Cloud, Principal Director Open Banking Compliance, Envestnet Yodlee. Kat explored the critical role Envestnet plays in advancing open finance, discussing how they empower financial institutions with tools for better data access, transparency, and personalized financial solutions.
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.
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.
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
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.
Contact: Laine Williams, (202) 897-4757, [email protected]
July 26, 2024, Washington, DC – The Financial Data and Technology Association of North America (FDATA) submitted to the Canadian House of Commons’ Standing Committee on Finance (FINA) its recommendations in advance of the 2025 budget. Our submission emphasized the need for the rapid and well-governed implementation of Canada’s open banking system and the expansion of open banking into an open finance framework to drive innovation and competition in the financial sector.
We urged the Canadian government to:
In the submission, FDATA highlighted that Budget 2024’s delivery of Canada’s initial CDB framework marked an important milestone in a long, consultative journey. Budget 2025 should both ensure delivery of open banking in line with the government’s and the market’s expectations and build on this important progress, including unambiguously making small business accounts part of the first phase and ensuring that the FCAC’s enforcement of the system is appropriately tiered based on the size, complexity, and use case of participating entities.
A full copy of the submission is available here.
Contact: Laine Williams, (202) 897-4757, [email protected]
July 24, 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) interpretive rule classifying Buy Now, Pay Later (BNPL) loans as Regulation Z-regulated products under the Truth in Lending Act (TILA).
FDATA North America commended the CFPB for classifying BNPL loans as Regulation Z-regulated products under the TILA, which will ensure that these loans are considered “covered data” under the Bureau’s forthcoming final rule implementing Section 1033 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Section 1033). The Section 1033 rule will allow consumers to share their balance and transaction information across credit card, checking, and savings accounts with third-party financial providers of their choice, ensuring greater financial transparency and empowerment. The designation of BNPL loans will enable consumers to make more informed financial decisions and manage their finances more effectively when considering applying for, utilizing, and servicing BPNL loans.
As the leading trade association that has long advocated for the inclusion of all consumer financial accounts under the CFPB’s Section 1033 rule, FDATA North America supports this incremental step towards a more expansive Section 1033 rulemaking. FDATA North America encourages the Bureau to continuously broaden the types of accounts covered under its Section 1033 rulemaking over time, ensuring that all consumers can access and share their financial data digitally and benefit from important protections when they do so.
A full copy of the letter is available here.
FDATA North America Monthly Newsletter for July 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 Sends Letter to Missouri Regulator to Support Consumer-Permissioned Data Access. On June 20, 2024, the Financial Data and Technology Association of North America (FDATA) sent a letter to Missouri Secretary of State Jay Ashcroft in response to warnings issued by the Missouri Securities Division. These warnings, sent on May 23, 2024, to over 40 state-registered advisors, raised concerns about the use of clients’ log-in credentials to access financial information with client consent. FDATA North America’s letter emphasized the importance of allowing financial advisors to access and review clients’ financial information for providing informed recommendations that improve financial outcomes for Missourians. They highlighted the negative impact of the Division’s warning, which discourages the use of third-party tools that enhance clients’ investment and financial outcomes. FDATA North America reiterated its commitment to data privacy and information sharing, advocating for secure consumer-permissioned data access. They urged the Missouri Securities Division to consider mandating secure interfaces for consumer-permissioned data access for retirement and securities accounts, in alignment with forthcoming federal rules by the Consumer Financial Protection Bureau, ensuring consumers can safely share their financial data with third parties. FDATA released a statement on its submission of the letter, which can be found here.
Member News & Activity
Basis Theory published a blog highlighting how connected payments help improve margins and reduce risk for merchants. Connected payments allow merchants to implement a logical layer between purchase requests and transaction submissions, enabling flexibility, improved fraud detection, and reduced risk, ultimately enhancing profitability and ensuring secure, continuous improvement of their payment systems.
Codat published a blog explaining how their bank transaction categorization engine works to improve decision-pmaking and efficiency in business lending by automating and accurately categorizing transactions. By leveraging real business data and integrating banking and accounting information, Codat’s engine helps lenders enhance data accuracy, streamline operations, and make more informed lending decisions.
Envestnet posted a new podcast episode on Data Driven Finance featuring Steve Boms, Founder & President at Allon Advocacy, discussing regulations in financial services. Key highlights include regulation readiness for open banking, key metrics for connected finance, and reassurances consumers need when sharing data.
Fiserv published an article discussing how financial institutions can combine self-service convenience with personal attention to satisfy consumers in the age of digital banking. By evolving and automating branches, financial institutions can balance delivering personal attention with providing self-service capabilities, ultimately improving efficiency, customer satisfaction, and revenue growth.
Flinks posted a blog announcing that Flinks Pay now supports Electronic Funds Transfers (EFTs) and has introduced an improved payment workflow that unifies the experience from onboarding to account activation. By providing a single, seamless workflow for validation, authorization, and payment setup, Flinks Pay helps Canadian lenders and borrowers manage their payments efficiently, reducing manual processes, minimizing fraud risk, and enhancing overall operational efficiency.
GoCardless was featured in the Summer edition of Financial IT Magazine, where CPO Andy Wiggan addresses whether open banking was overhyped, the potential for bank payments to compete with cards, and what it will take for VRPs and commercial use cases to achieve unanimous success.
MX’s Jane Barratt attended the Fifth Workshop on Credit Card Lending, Consumer Finance, and the AI Revolution on June 27–28, 2024. The Federal Reserve Bank of Philadelphia and the Supervisory Research and Policy Forum (SURF) organized the workshop, providing a platform for regulators, industry experts, and academics to discuss key topics shaping the consumer finance industry, including innovations in open banking, payment networks, data privacy, and the impact of ML/AI on consumer lending.
Plaid was featured in a Fast Company article highlighting its new Plaid Layer technology, which simplifies the process of signing up for financial accounts and linking bank accounts to just 15 seconds. This innovative solution allows users to set up accounts with compatible financial services using stored data, significantly reducing the time and effort required for onboarding and boosting user conversion rates by up to 25%.
Events and Submission Deadlines
Contact: Laine Williams, (202) 897-4757, [email protected]
June 20, 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 the United States and Canada, today sent a letter to Missouri Secretary of State Jay Ashcroft in response to warnings the agency sent to state-registered advisors regarding potential investor harm associated with advisors’ use of technology-based tools to help manage their clients’ portfolios.
The Missouri Securities Division on May 23, 2024, sent warning letters to more than 40 state-registered advisors raising concerns about advisors using clients’ log-in credentials to access financial information with client consent.
In its letter, FDATA North America emphasized that allowing financial advisors to access and review clients’ financial information is essential for providing informed recommendations that improve financial outcomes for Missourians. FDATA North America also highlighted the potential negative impact of the Division’s warning, which discourages the use of third-party tools that can enhance clients’ investment and financial outcomes. FDATA North America reiterated its commitment to data privacy and information sharing while advocating for secure consumer-permissioned data access and urged the Missouri Securities Division to consider mandating, in alignment with forthcoming federal rules by the Consumer Financial Protection Bureau, the promulgation of secure interfaces for consumer-permissioned data access for retirement and securities accounts, ensuring that consumers can safely share their financial data with third parties.
A full copy of the letter is available here.
Increasing financial inclusion is vital in supporting the financial wellbeing of individuals and SMEs and to drive economic growth.
In the UK, the government plays a crucial role in enabling financial inclusion. For example the House of Commons Treasury Committee Inquiry into SME Finance, the establishment of the Centre for Finance, Innovation and Technology (CFIT) last year, as well as the UK’s Economic Secretary’s announcement of a new industry-led Open Finance Taskforce focused on how financial data can be safely unlocked to improve SMEs’ access to credit.
By leveraging open banking data, and other alternative data sources, we can improve inclusion by assessing creditworthiness for those who may not have traditional credit histories. Analysing real-time financial data such as income, spending patterns, and banking transactions allows lenders to make more accurate lending decisions and extend credit to individuals who were previously underserved or excluded from traditional financial services.
HMRC tax data can also improve lending decisions for SMEs by 25%, as demonstrated in the recent CFIT proof-of-concept led by HSBC. The trailblazing Financial Conduct Authority (FCA) makes it possible to test these novel approaches through their Innovation Hub’s Permanent Digital Sandbox, Innovation Pathways and Regulatory Sandbox services.
Lastly, financial inclusion can be undoubtedly propelled further through new technologies that improve access to financial services for individuals in remote areas, streamline the application process for loans and credit, and enable more accurate assessment of creditworthiness for underserved populations. From mobile banking apps to digital payment platforms, as well as artificial intelligence for alternative credit scoring, there is exciting tech that can expand financial inclusion and improve financial wellness and resilience.
Darren Smith
Executive Director Finexos, an FDATA Europe Member