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What Obligation Does an FI Have to Provide Third Parties Access to Consumers’ Banking Accounts?

By Sarah Grotta
December 16, 2019
in Analysts Coverage, Banking, Data, Debit, Digital Banking, Emerging Payments, Open Banking, P2P
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What Obligation Does an FI Have to Provide Third Parties Access to Consumers’ Banking Accounts?

What Obligation Does an FI Have to Provide Third Parties Access to Consumers’ Banking Accounts?

In the U.S., where open banking is not mandated as it is in the European Union and other countries, fintechs offering solutions like financial planning apps, person-to-person  (P2P) payment apps, and retailer payment wallets are running into problems getting banks to allow access to consumers’ data.  The Wall Street Journal reported that consumers who want to open a Venmo account and connect it to their bank account at PNC need to do so the old fashioned way, by entering their routing and transit number and their bank account number rather than their digital banking credentials.  PNC has blocked account verification access offered through Plaid and used by many fintechs who are looking to gain access to consumers’ banking transactions and current balance.  PNC is not the only one.

From the article:

Many PNC client are having trouble connecting their bank accounts to their Venmo aps, cutting off their access to the popular mobile-payment system, owned by PayPal Holding, Inc.  When they have sought help, they have found the two companies blaming each other for disruption.

PNC Financial Services Group suggested I tweets that customers switch to Zelle, a payment app that it and other big banks operate jointly and that competes with Venmo.

From PNC’s perspective:

  • They and other banks that offer P2P services are interested in creating more Zelle users not just for P2P transactions, but also as a means to support business-to-consumer (B2C) distributions and payments to small businesses.
  • Also, banks are not assured of the security used by fintechs to keep consumers’ data safe.  If something were to go wrong, banks have a lot more to lose in reputation and expenses from fraud losses than the fintech firms offering these services

The flip side, however, is that consumers often prefer financial apps offered by organizations other than their bank.  If their bank cuts them off, will consumers leave their bank for another that does provide access?  It’s a gamble.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

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Tags: Banking AppDigital DisruptionOpen BankingP2PPayPalPNCVenmoZelle

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