America may be the home of the brave and the land of the free, but all of our personal financial data aren’t out there playing with the deer and the antelope.  They’re in the elephant ring being tossed about by one financial behemoth to another, landing in a large pile set upon by maggots when one elephant loses its grip.  The European Union has established a regime for personal-data ownership one might once have called all-American.  And, in a notice overlooked due to the squabble over mandatory arbitration, the CFPB last week followed the EU’s example, declaring for the first time that our personal consumer financial data are ours to control.  The EU intends its rules to restructure banking and, while the CFPB is coy, its standards could do the same.

As our assessment of the CFPB’s new data-sharing principles details, the Bureau has for the first time established a de facto consumer right to own personally-identifiable data and, it would appear, also the data inferred or observed from it.  The construct – much blessed by fintech companies – is that data sharing dictated by consumer choice will so redefine product offerings, underwriting, and distribution that under-served needs will be met, credit will flow, payments will be transferred in a blink, and all will be well.

Maybe, but I suspect this will be true only for selected products for high-profit consumers who exercise their ownership rights in thoughtful, prudent, educated, and informed ways.  The only way to make good money in retail finance and still offer a full suite of infrastructure-intensive services to low-margin customers is to dispense with all of the rules that now govern financial intermediation and payments.  I’m not sure even then that the money’s there. 

Cross-subsidization takes you only so far, a strategic dilemma made evident only as data impediments to product disaggregation are disintegrated by the advent of digital data and all the algorithms that exploit it.  Reaching into a cross-subsidized business model to pick out the nifty bits is fundamental to the fintech business franchise value, and no wonder.

It’s very easy quickly to foresee a day in which consumers who own their data store funds in FDIC-insured banks and then essentially lease the money for payments, credit, and investment products across a dizzying array of competing companies under some to no prudential regulation with little to any recourse to emergency liquidity.  This is precisely the disintermediation destiny the EU hopes will shake up its anachronistic, inefficient, state-controlled banking system.

The CFPB’s decision to follow the EU’s lead is more problematic.  This isn’t because American banks deserve a lot more sympathy than their European peers.  U.S. banking could do with a good deal more innovation, but for this to have macroeconomic purpose, innovation must ensure efficient financial intermediation, effective monetary-policy transmission, financial inclusion, and systemic resilience.  Before de facto consumer ownership of our own data turns into de facto deconstruction of the U.S. financial system, we should be sure we know what the new order will bring us.