Data Rights: Unlocking Banking Competition

Federal regulator moves to encourage banks to compete on service

A key federal regulator is taking steps to give consumers control of their personal financial data, a move they say will improve competition in the financial marketplace.

The Consumer Financial Protection Bureau (CFPB) has proposed a rule that would create what it is calling Personal Financial Data Rights.

The idea is that consumers could share key details of their financial transactions to allow banks and other financial institutions to offer tailored services.

“With the right consumer protections in place, a shift toward open and decentralized banking can supercharge competition, improve financial products and services, and discourage junk fees,” said CFPB Director Rohit Chopra. “Today, we are proposing a rule to give consumers the power to walk away from bad service and choose the financial institutions that offer the best products and prices.”

In the current climate, data sharing varies by institution and some banks charge fees for data sharing or limit the data that can be shared. The new proposal would give customers control over their banking data and over the entities with which it is shared.

According to the CFPB:

This would allow them to access competing products and services without worrying that their data might be collected, used, or retained to serve commercial interests over their own. Importantly, people could be certain that their data would be used only for their own preferred purpose—and not for financial institutions or tech companies to surveil and manipulate.

The CFPB suggests that if banks knew customers could share their data at any time, they would be incentivized to compete on service. Additionally, consumers would have greater ability to shop in the financial marketplace with their specific data in order to obtain services that meet their needs.

Photo byJonathan CooperonUnsplash