Karen Petrou: How to Prevent Open Banking From Turning Into the Wild West
There are so many rules coming from so many directions at U.S. financial institutions that spotting key strategic challenges or opportunities is harder than ever. That more and more of these rules are longer than 1,000 pages makes C-suite impact considerations still harder to highlight. In the midst of this morass, one proposal from the CFPB on consumer-data rights may be easy to overlook, but this seemingly-petite 299-page rule is at least as consequential as the thousands of capital and CRA pages getting all the not-so-love.
Why? Quite simply, consumer data are the currency of commerce in general and retail finance in particular. The stratospheric ascent of data-driven companies such as Amazon are indisputable proof that competitors who control data quickly control consumers, mobilizing ever more powerful network effects that then crush all but the most nuanced niche providers. The CFPB is right that banks no more deserve exclusive provenance over consumer data than tech-platform companies, but requiring banks to give these data away as the Bureau plans means the crown jewels of each retail franchise are now out on the shop counter for free.
Companies far better able to make astute use of these data than all but a few banks will quickly find ways to persuade consumers to give personal information to them unless the final data rights standard has considerably more consumer protection built in than the proposal. I know it sounds odd to say that a CFPB proposal is light on consumer protections, but so it …