Tech­nol­ogy

Cap­i­tal One’s dis­pute with Plaid raised ques­tions about the abil­ity of banks and ag­gre­ga­tors to work to­gether. But the end of that fight, and Cap­i­tal One’s deal with Finic­ity, show com­mon ground can be reached — even­tu­ally.

National Mortgage News - - Contents - By Nathan DiCamillo

Cap­i­tal One mends fences with one ag­gre­ga­tor, deep­ens links with an­other

Cap­i­tal One is mov­ing past its dif­fer­ences with data ag­gre­ga­tors.

The bank has re­stored data access to Plaid Tech­nolo­gies and also signed a data-ex­change agree­ment with Finic­ity.

Cap­i­tal One re­stored cus­tomer data access to Plaid re­cently, a source fa­mil­iar with the sit­u­a­tion said. The move re­solved a very pub­lic dis­pute be­tween the ag­gre­ga­tor and the bank.

Cap­i­tal One cus­tomers will be able to use the third- party apps and ser­vices that Plaid of­fers, the source said. Plaid, which is based in San Francisco, en­ables fi­nan­cial apps such as Acorns, Venmo and Robin­hood.

Nei­ther Cap­i­tal One nor Plaid wanted to dis­cuss the is­sue pub­licly.

While Finic­ity has been ag­gre­gat­ing data from Cap­i­tal One for sev­eral years, it has pushed to de­velop stronger re­la­tion­ships with banks in the last three years and has been work­ing on this agree­ment for the past year.

“This is a con­sumer per­mis­sion link,” said Nick Thomas, Finic­ity co-founder and pres­i­dent. “Fi­nan­cial in­sti­tu­tions have seen the power of dig­i­ti­za­tion and that it’s im­por­tant to be a player in the ecosys­tem be­cause it re­duces cost for every­one.”

De­spite these de­vel­op­ments, U. S. banks and fin­techs are mov­ing to­ward col­lab­o­ra­tion at a glacial pace, one mar­ket observer said.

“This is where we are to­day: An an­nounce­ment of a deal or a quiet agree­ment to re­open access is like an achieve­ment,” said Mark Sch­wan­hausser, di­rec­tor of om­nichan­nel fi­nan­cial ser­vices at Javelin Strat­egy & Re­search. “In many ways it’s a frus­trat­ing pe­riod for ag­gre­ga­tors.”

Other data ag­gre­ga­tors said they had ex­pe­ri­enced access is­sues with Cap­i­tal One also. For­mFree, which pro­vides mort­gage lenders with ver­i­fi­ca­tion of as­set re­ports that are used as an al­ter­na­tive to bor­row­ers sup­ply­ing pa­per or PDF bank state­ments, had alerted users on July 5 it “sus­pended data feeds from Cap­i­tal One in re­sponse to a data dis­rup­tion.” That was later re­solved.

In a state­ment pro­vided by Cap­i­tal One, the bank down­played any sug­ges­tion it had been play­ing hard­ball with ag­gre­ga­tors. The state­ment said it was fol­low­ing pro­to­col to safe­guard its data.

“It is pos­si­ble that the reg­u­lar up­grades that we make to im­prove the safety and se­cu­rity of our sys­tems may im­pact the abil­ity of some third par­ties to access cus­tomer data, should they rely on meth­ods that don’t meet our rea­son­able se­cu­rity stan­dards,” the bank said. “While this may cause a tem­po­rary in­con­ve­nience as im­pacted third-par­ties adapt, this was an im­por­tant up­grade we made to help pre­vent cus­tomer harm.”

Finic­ity, in Mur­ray, Utah, will con­nect through Cap­i­tal One’s Cus­tomer Trans­ac­tions ap­pli­ca­tion pro­gram­ming in­ter­face. With open au­tho­riza­tion tech­nol­ogy, users will not need to share their bank­ing cre­den­tials with third-party apps. In­stead of hand­ing over cus­tomer data, the tech cre­ates to­k­enized access, pro­vid­ing di­rect au­tho­riza­tion through Cap­i­tal One.

Once the con­nec­tion is in place, cus­tomers are ex­pected to mi­grate in the first quar­ter of 2019.

“Tech­nol­ogy is en­abling us to bring waves of new fi­nan­cial tools into the mar­ket­place,” Becky Heiron­imus, man­ag­ing vice pres­i­dent of en­ter­prise dig­i­tal prod­ucts and data con­nec­tions at Cap­i­tal One, said in a press re­lease. “We know many of our cus­tomers ac­tively use and rely on third-party ser­vices to help them man­age

and track their fi­nances, and we ap­pre­ci­ate the value these ser­vices pro­vide. Our agree­ment with Finic­ity helps our mu­tual cus­tomers take full ad­van­tage of their plat­form.”

The bank has steadily main­tained it is will­ing to work with ag­gre­ga­tors, but its se­cu­rity ex­pec­ta­tions for se­cure data shar­ing had to be met by third par­ties.

Bran­don Dewitt, chief tech­nol­ogy of­fi­cer at MX (an­other data ag­gre­ga­tor that part­ners with Finic­ity), said the agree­ment demon­strated Cap­i­tal One is will­ing to work with fin­techs along guide­lines that pro­vide data access and sat­isfy se­cu­rity con­cerns.

“This is an ex­am­ple of an agree­ment that stands on the gov­er­nance be­ing out­lined with how data should be han­dled, se­cured and uti­lized as out­lined by guid­ance from the [Con­sumer Fi­nan­cial Pro­tec­tion Bureau] and re­cent guid­ance from the Trea­sury,” Dewitt said. “These agree­ments are just com­ing to prac­ti­cal use, but many are be­ing con­ceived as we speak.”

Cap­i­tal One’s Heiron­imus said in the re­lease that “through the API, our mu­tual cus­tomers can se­curely con­nect with thou­sands of lead­ing fin­tech ap­pli­ca­tions and en­able access to ac­cu­rate ac­count in­for­ma­tion that gives them con­trol and trans­parency over how and when they choose to share their Cap­i­tal One fi­nan­cial data.”

This agree­ment fol­lows sev­eral Finic­ity has made with other big banks, in­clud­ing USAA, Wells Fargo and JPMor­gan Chase. With a va­ri­ety of re­la­tion­ships with service and ap­pli­ca­tion providers, Finic­ity ag­gre­gates data for personal fi­nan­cial man­age­ment tools, gen­er­ates ver­i­fi­ca­tion re­ports for lenders and sup­ports ACH ver­i­fi­ca­tion for pay­ment providers, among other ser­vices.

Cap­i­tal One’s other API part­ners in­clude Aba­cus, Clar­ity Money, eMoney Ad­vi­sors, Ex­pen­sify, In­tuit and Xero.

These agree­ments are done at the dis­cre­tion of banks. While the CFPB and the Trea­sury Depart­ment have is­sued guid­ance on data shar­ing, there is no reg­u­la­tion com­pelling such trans­fers. By com­par­i­son, open bank­ing reg­u­la­tion in the U. K. forces banks to share data with third-party fin­techs and re­tail­ers.

To ad­dress trust and com­pet­i­tive con­cerns, U. S. fin­techs and data ad­vo­cacy groups have pro­posed data-shar­ing frame­works for the in­dus­try. The lat­est was pre­sented in May by En­vest­net’s Yodlee, Quovo and Morn­ingstar’s ByAl­lAc­counts.

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