If Consumers Can Take Their Banking Data with Them, Is Your Credit Union Prepared?
By W.B. King
In early July, President Joe Biden released an executive order: “Promoting Competition in the American Economy.” The order includes 72 initiatives directing federal agencies to “promptly tackle” some of “the most pressing competition problems” facing the U.S market.
As part of this edict, the White House “encourages the Consumer Financial Protection Bureau (CFPB) to issue rules allowing customers to download their banking data and take it with them.” This regulation, the White House believes, would provide consumers with a cheaper, streamlined approach to switching financial institutions.
Time will tell if the CFPB acts on the directive, but if the agency does embrace the order, it could have a negative short-term impact on financial institutions, explained Cornerstone Advisors’ Director of Research Ron Shevlin.
“When these changes actually get implemented — remember the executive order is only instructing the CFPB to make this data portability thing a priority — there will be a short-term negative impact on credit unions who have not already digitized their account opening and lending processes,” noted Shevlin. “The technical ramifications will fall on the vendors in the industry, but credit unions are still going to have to make a lot of process-related changes for deposit account opening and loan origination.”
Defining Consumer Financial Data
The Salt Lake City-based Atomic Financial, a payroll connectivity and financial infrastructure provider for credit unions, among other fintech companies, supports the White House’s stance. In February 2021, the company’s CEO Jordan Wright sent a “comment letter” to the CFPB.
“Atomic appreciates the opportunity to participate in the Bureau’s process for adopting an initial rule under 1033 of the Consumer Financial Protection Act of 2010. Atomic urges the Bureau to act swiftly to adopt an initial, final rule implementing the consumer’s rights to access of financial data,” Wright’s letter read in part.
“More than a decade has passed since Congress enacted the framework to empower a consumer to improve his or her financial well-being through rights to access to the consumer’s financial data,” he continued. “There is no reason for further delay, and the Bureau must adopt an initial, final rule in 2021 so that the consumer’s rights can be realized, together with an express statement of policy to refine the rule over time, as needed.
Atomic Financial's Head of Markets Lindsay Davis said the company believes that “payroll data” is “financial data” and hopes federal agencies enact proposed regulations. “This executive order is about empowering consumers, and to get there, we need to emphasize the portability of financial data in the traditional payroll system,” said Davis.
In his letter, Wright expanded on Davis’ point by requesting that the Bureau “expressly state” that “consumer payroll information” is a form of “consumer financial data.” He reiterated that all consumers should have the right to access and obtain this data.
“In doing so, the Bureau will be recognizing that consumer payroll information can be an essential source for building a profile or history of a consumer’s financial capabilities,” he noted. “And thereby support each consumer who needs help to show that he or she can qualify for financial products and services — and should be able to obtain those products and services at fair prices.”
Data Portability’s Silver Lining
If the CFPB does move forward with President Biden’s data portability directive, Shevlin said the longer-term impact on credit unions will be positive.
“It will help put credit unions on a more equal footing with many of the fintechs in the industry who are already enabled to handle this data portability for account opening and loan origination purposes,” he said. “The other longer-term benefit for credit unions is that because they’ll be forced to provide this data portability capability, they’ll develop better analytical capabilities to understand where all their members’ data is going to (and coming from).”