The short answer is: I hope not.
I don’t wear tinfoil hats, I swear. Having said that, I do warn family and friends of the dangers of oversharing. Social media’s voracious appetite for personal data alarmed me. When I became privy to the extent of data being without my knowledge or approval, I left. The lack of transparency was positively creepy and the situation has actually gotten worse as apps figure new ways to their AI algorithms.
So how can I be an advocate for Open Banking and data sharing? Isn’t that grossly hypocritical? When we promote Open Banking, we are promoting a responsible, secure and transparent framework for data sharing.
Let me explain.
Flying Under the Financial Services Radar
Too many Americans have awful -or non-existent- credit scores because they don’t engage in those transactions credit companies rely on to create credit scores: they rent rather than pay a mortgage, they don’t have credit cards. Nearly 40% of the population pay by cash. Many leverage payday loans (the absolute worst decision they could make on so many different levels).
Adding rent histories, utility payments and other purchases to the credit score pool would allow people to create credit histories. They would increase their ability to drive up their scores. This in turn would lower their interest rates. If more people are paying back loans at lower interest rates, they reduce risk for themselves as well as for the financial institutions behind the loans and credit cards.
How Open Banking Corrects Data Sharing Inequities
Open Banking can go a long way to helping achieve these goals. How? By increasing the data that’s shared between entities: banks, lenders, credit agencies and merchants. This is how Open Banking can help. This is why we advocate for open APIs like FAPI, FDX and OpenID. These groups are doing their utmost to enable secure data sharing while protecting consumers. Additionally, they are working very hard to insisting their partners provide consumers better data controls.
Privacy: Can you ever get enough?
Which brings us to the other side of the coin: privacy.
Open Banking advocates are pushing financial institutions as well as the technology firms to play nicely with consumers’ data. All parties are looking at methods for providing consumers with complete control over what data is shared, how often it is shared, and with whom it is shared. There are efforts underway as well to provide much greater transparency around data sharing. Hint: there are more fingers in the pie than you thought.
IMPORTANTLY most (not all) parties are looking at giving consumers the tools to manage what’s shared as well as shut it all down. This is a critical difference between Open Banking and social media: the social media companies insist that anything you upload, like, comment on or share on their platforms becomes their property and they can use it as they want. Financial Institutions and fintechs, on the other hand, acknowledge that all those financial transactions they leverage belong to you.
Most importantly, though, open banking gives you the power to turn it off. The power to be forgotten.