Protocol | Fintech

America might finally get open banking — but not without a fight

Proposed rulemaking on Dodd-Frank Section 1033 could fundamentally reshape American finance.

Unlocking a bank

New rules about the sharing of financial data could fundamentally reshape American fintech.

Image: sorbetto / Getty Images

Late last week, the Consumer Financial Protection Bureau quietly published a statement that could fundamentally change the fintech industry.

The catchily-named "Advance Notice of Proposed Rulemaking on Consumer Access to Financial Records" (colloquially known as the ANPR) explained that the CFPB plans to create new regulation to implement Section 1033 of the Dodd-Frank Act, and is seeking stakeholder input before it does so. Yes, that's a lot of jargon. But look past that, and the consequences are significant: The future of fintech is now on the line.

The Dodd-Frank Act is a behemoth of financial legislation, passed in the aftermath of the last financial crisis. It sought to overhaul the system and revive trust in a sector where that was deeply lacking. In doing so, it also laid the groundwork for the following decade's fintech boom. That's partly down to the unassuming Section 1033. "It says consumers have the right to access their financial account information in a machine-readable format," Plaid's global head of policy, John Pitts, told Protocol. That allows companies like Mint to aggregate your accounts, for instance, and lets cash-flow based lenders access your bank details so they can effectively underwrite loans. It's the closest thing the U.S. has to something like the U.K.'s Open Banking regime, or the EU's Payment Services Directive 2. Section 1033, Pitts said, "underpins all of fintech."

Despite its importance, the CFPB hasn't formally implemented it. After a request for information in November 2016, it issued a set of non-binding principles the following year. But the lack of formal regulation has caused problems. As the CFPB noted, "there are indications that some emerging market practices may not reflect the access rights described in Section 1033." Plaid has encountered some of those issues itself, Pitts said: Some banks refuse to share customers' interest rate charges, he said, on the basis that the charges are proprietary information. Others are worried about enabling competition, it seems. "We have ... seen a bank include language in a contract saying Plaid may not connect a customer with any service that might cause that customer to leave this bank," Pitts said.

The CFPB clearly summed up the issue: "Competitive dynamics mean that data holders may have an incentive to restrict access by certain data users."

Formal regulation that defines just who can access data and when they can do it may offer a solution. The single most important line of this ANPR, according to Pitts, is the following: "Authorized data access holds the potential to intensify competition and innovation in many, perhaps even most, consumer financial markets." The key, he thinks, is the focus on competition, a theme that regularly repeats throughout the ANPR. "That's surprising for an agency that does not have competition jurisdiction," he said.

Overall, the ANPR indicates to Pitts that the agency is "not going small." It seems, he said, that the CFPB has recognized just how critical data-sharing is to the future of finance. The bureau is indicating that it sees this as "a critical regulatory piece of infrastructure," he said — something worth devoting its time to, given the repercussions for the entire financial industry.

But doing so won't be easy. There are some thorny debates to be had, some of which have no easy answers. Banks and fintechs may disagree about what the scope of the data is: whether banks are obligated to share interest rate data, for instance. They'll also have to figure out who's in control: If a customer wants to connect their bank account to a company the bank thinks is a fraud, is the bank allowed to stop them? If so, what's stopping the bank from preventing customers from accessing legitimate companies that the bank deems illegitimate? And if not, who's liable when something goes wrong? In a statement last year, the American Banking Association said that data aggregators like Plaid ought to be designated financial institutions, and subject to the rules that come with that — including being liable when something goes wrong.

Issues like that are complicated. But Pitts is hopeful that they'll be worked out without too much animosity. "I actually am not expecting [banks] to lobby in the other direction," he said, noting that everyone is just "working in the interest of their customers." And he's not bothered about the banking industry's vast lobbying budgets, either. "Money and influence matters, but policy and consumer demand also matters," he said. Plus, he added, "the CFPB is supposed to be insulated from that type of money and lobbying — so fingers crossed."

Surprisingly for a policy debate in 2020, Section 1033 "seems to be a non-partisan, non-political issue right now," Pitts said. No politicians are strongly supporting either side. But as things progress, that might change: The level of attention being given to it now "gives it some possibility that it gets picked up as an issue," he said.

There's plenty of time for that to happen. Once the Federal Register prints the CFPB's ANPR, a 90-day comment window will open, giving the public plenty of time to respond to the ANPR's 111 questions. After that, the CFPB will put together proposed rules, before another comment period — eventually ending with actual regulation. "You should think of [the ANPR] as the start of a two- to four-year process," Pitts said. By which time Europe will probably have new rules, and we can repeat the whole cycle again.

Google’s latest plans for Chromecast are all about free TV

The company is in talks to add dozens of free linear channels to its newest streaming dongle.

Google launched its new Google TV service a year ago. Now, the company wants to add free TV channels to it.

Photo: Google

Google is looking to make its Chromecast streaming device more appealing to cord cutters. The company has plans to add free TV channels to Google TV, the Android-based smart TV platform that powers Chromecast as well as select smart TVs from companies including Sony and TCL, Protocol has learned.

To achieve this, Google has held talks with companies distributing so-called FAST (free, ad-supported streaming television) channels, according to multiple industry insiders. These channels have the look and feel of traditional linear TV networks, complete with ad breaks and on-screen graphics. Free streaming channels could launch on Google TV as early as this fall, but the company may also wait to announce the initiative in conjunction with its smart TV partners in early 2022.

Keep Reading Show less
Janko Roettgers

Janko Roettgers (@jank0) is a senior reporter at Protocol, reporting on the shifting power dynamics between tech, media, and entertainment, including the impact of new technologies. Previously, Janko was Variety's first-ever technology writer in San Francisco, where he covered big tech and emerging technologies. He has reported for Gigaom, Frankfurter Rundschau, Berliner Zeitung, and ORF, among others. He has written three books on consumer cord-cutting and online music and co-edited an anthology on internet subcultures. He lives with his family in Oakland.

While it's easy to get lost in the operational and technical side of a transaction, it's important to remember the third component of a payment. That is, the human behind the screen.

Over the last two years, many retailers have seen the benefit of investing in new, flexible payments. Ones that reflect the changing lifestyles of younger spenders, who are increasingly holding onto their cash — despite reports to the contrary. This means it's more important than ever for merchants to take note of the latest payment innovations so they can tap into the savings of the COVID-19 generation.

Keep Reading Show less
Antoine Nougue,Checkout.com

Antoine Nougue is Head of Europe at Checkout.com. He works with ambitious enterprise businesses to help them scale and grow their operations through payment processing services. He is responsible for leading the European sales, customer success, engineering & implementation teams and is based out of London, U.K.

Protocol | Policy

Iris scans for food in Jordanian refugee camps

More than 80% of the refugees in Jordanian camps now use iris scans to pay for their groceries. Refugee advocates say this is a huge future privacy problem.

A refugee uses their iris to access their account.

Photo: KHALIL MAZRAAWI/AFP via Getty Images

Every day, tens of thousands of refugees in the two main camps in Jordan pay for their groceries and withdraw their cash not with a card, but with a scan of their eye.

Nowhere in the United States can someone pay for groceries with an iris scan (though the Department of Homeland Security is considering collecting iris scans from U.S. immigrants, and Clear uses iris scans to verify identities for paying customers at airports) — but in the Jordanian refugee camps, biometric scanners are an everyday sight at grocery stores and ATMs. More than 80% of the 33,000-plus refugees who receive cash assistance and (most of them Syrian) and live in these camps use the United Nations' Refugee Agency iris-scanning system, which verifies identity through eye scans in order to distribute cash and food refugee assistance. Refugees can opt out of the program, but verifying identity without it is so complex that most do not.

Keep Reading Show less
Anna Kramer

Anna Kramer is a reporter at Protocol (Twitter: @ anna_c_kramer, email: akramer@protocol.com), where she writes about labor and workplace issues. Prior to joining the team, she covered tech and small business for the San Francisco Chronicle and privacy for Bloomberg Law. She is a recent graduate of Brown University, where she studied International Relations and Arabic and wrote her senior thesis about surveillance tools and technological development in the Middle East.

Protocol | China

Weibo is muzzling users for discussing a landmark #metoo case

A number of accounts have been suspended, even deleted, after voicing support for the plaintiff.

Photo: Photo by Kevin Frayer/Getty Images

As a Beijing court dismissed China's landmark sexual harassment case on Tuesday, Weibo censors acted to muzzle a number of accounts that voiced support for the accuser, or even simply discussed the trial beforehand.

In 2018, the plaintiff Zhou Xiaoxuan, better known by the nickname Xianzi, filed a high-profile #MeToo case against Zhu Jun, a renowned state broadcast show host. Zhou claimed that Zhu sexually harassed her while she was an intern on Zhu's show in 2014. Chinese web users have closely followed the civil suit, which has also drawn international media attention.

Keep Reading Show less
Shen Lu

Shen Lu is a reporter with Protocol | China. Her writing has appeared in Foreign Policy, The New York Times and POLITICO, among other publications. She can be reached at shenlu@protocol.com.

Protocol | Enterprise

Take that, Slack: ServiceNow gets a little closer to Microsoft Teams

ServiceNow is expanding its decade-long partnership with Microsoft as both companies intensify their rivalry with Salesforce.

Microsoft and ServiceNow's "coopetition" is aimed at a higher goal: undermining Salesforce, which is fast becoming the main rival for both vendors.

Photo: Uwe Anspach/Getty Images

For ServiceNow, Microsoft is the lesser of two evils compared to Salesforce.

After ditching Slack for Teams following the Salesforce acquisition, ServiceNow is deepening its decade-long partnership with Microsoft, promising co-development of new products and fresh integration capabilities within Teams, it plans to announce Thursday.

Keep Reading Show less
Joe Williams

Joe Williams is a senior reporter at Protocol covering enterprise software, including industry giants like Salesforce, Microsoft, IBM and Oracle. He previously covered emerging technology for Business Insider. Joe can be reached at JWilliams@Protocol.com. To share information confidentially, he can also be contacted on a non-work device via Signal (+1-309-265-6120) or JPW53189@protonmail.com.

Latest Stories