As the debate over consumer data privacy shifts from living room to boardroom to boardroom on Capitol Hill, more companies are seeing the business potential of data portability.
Use cases range from loan applications to switching banks – and far beyond in new forms of digital marketing fueled by targeting and data segmentation.
As it is, consumer financial data is decidedly non-portable. When they want to access it, they not only have to pay for the data that belongs to them, but also take legal responsibility for it. Consumers who apply for loans or change banks usually don’t want such onerous obligations.
Kirill Klokov, CEO of Citadel API, calls it “an unpleasant problem”, and his company is working to solve it.
“The only thing that bothers me as a consumer [is that] when you apply for a loan today you have to wait until the bank [contact] the intermediary, which partners with the payroll company, then an invoice for $ 50, $ 60, $ 100 will be sent to you directly, ”he said.
“It’s pretty funny that as a consumer I give you permission to access my data, you access my data, and then you invoice me for it,” he told Karen Webster. .
Citadel’s solution is to cut out the middleman, leaving its Payroll Application Programming Interface (API) running in the background to move the data to where the consumer wants to send it in a free, no-cost process. friction.
“Our team is focused on the user experience,” he said. “I built my career in the product. It’s really easy to get stuck in the architecture and think about how to create the best system, but what we should really care about… is how do you create the best user experience? “
The Citadel API partners with financial institutions (FIs) and payroll companies, providing an online portal where consumers log in and give permission to share data when and where they want. Citadel does not store or monetize consumer data in any way, Klokov said.
“It’s consumer data, and from my perspective, consumers should do whatever they want with that data.”
See also: Portability and Data Accountability: A Three-Dimensional Chess Game
It’s all about authorization
A typical scenario for Citadel is a consumer requesting a loan. “The lender has to verify your income and your employment, and we will on your behalf connect to the payroll provider, extract the data, normalize it and instantly send it back to the company that needs it. It’s a very transparent and efficient process, ”Klokov said.
Many Citadel lending customers mark its solution blank, so the API works in the background from the consumer’s point of view, although they must agree to a common confidentiality agreement between Citadel and its partners.
Permission is the name of the game, and the stakes are rising all the time.
As the US now catches up with the EU and other governments that have already enacted strict data security laws, Klokov said the way Citadel handles authorization and data sharing avoids any regulatory pitfalls. potential relying solely on consumer consent.
“You can regulate [data sharing], but you can also change your approach, ”he said. “Our approach is entirely consumer-consented. If the consumer wants a better loan – and this is what I think about all day with our clients who are primarily lenders and background check companies – how does the consumer get … a better auto loan? , a better mortgage, etc. ? The approach we have taken is very transparent.
He said that “even though the regulation is going to happen [in the U.S.], we come with a very different view of the solution. It’s transparent and user-friendly.
See also: Data sharing, XaaS targets the efficiency of SME financing
Portable data opens new doors
Allowing consumers to share their income and employment data with lenders and others can create new use cases that open up the underwriting process in a more user-friendly way. This has major potential for the underbanked – as well as for the large number of people without the best credit history that have been around for quite some time.
“The employment and income check changes the dynamic for people who don’t have a credit history,” Klokov said. “If for some reason you are underbanked or don’t have the best financial discipline but have a good job, why can’t you get a good loan? You should be [able to]. “
By deducting loan payments directly from paychecks before they go to a bank account, “you can take a small portion of the paycheck and then send it back to the main account they have the bank account.” As a result, you can offer consumers a much better deal in terms of APR.
Switching banks easily is another relevant use case. Referring to President Biden’s July Executive Order calling on the Justice Department and Federal Trade Commission to crack down on anti-competitive practices, PYMNTS ‘US Open Banking Tracker® noted, “The rule is intended to allow consumers to switch banks. more easily, ”adding,“ Federal authorities are therefore placing more emphasis on how data is shared between banks, in particular how it is made available to consumers. “
This touches on one of Citadel’s other core services: easy direct deposit switching.
All of this portends a future of consumer data ownership where all players win.
“I think we’re going to go from companies that exchange data behind your back to a situation where you have solutions like ours and other solutions that are authorized by consumers, and eventually you will have your own data repository that you will be able to transfer from one place to another, share with one click, and if you don’t want to share the data anymore, you can take it back.
Get the tracker: The US Open Banking Tracker®