Response to Part II (Remedies) of report by the Financial Conduct Authority (FCA) on its cash savings market study

Transcription

1 Response to Part II (Remedies) of report by the Financial Conduct Authority (FCA) on its cash savings market study 18th February

2 Response by the Financial Data and Technology Association (FDATA) to Part II (Remedies) of report by the Financial Conduct Authority (FCA) on its cash savings market study 1. About FDATA 1.1 The Financial Data and Technology Association (FDATA) The Financial Data and Technology Association is a trade association for financial technology ("fintech") companies which give customers more control of their financial data. The Association was set up in late Our current member companies are, in alphabetical order, Intuit QuickBooks, Money Dashboard, MoneyHub, Runpath, SafetyNet Credit and Yodlee. They provide innovative financial applications and services to empower personal and small businesses consumers to make better decisions and take fuller control of their financial lives across all their accounts, credit cards, loans and investments. 1.3 We seek to work with government, regulatory authorities and financial institutions in our mission to make it easier for people to manage their money. We would like to see, and assist with, the creation of clear industry standards which will ease the opening up of Britain s financial sector to the benefits of financial data and technology. 1.4 We anticipate that our Association will evolve from being focussed on lobbying for open data in the financial aggregation industry to leading the production and maintenance of a set of standards for the industry post-regulation. 1.5 We have engaged with the following organisations over the last two months: the British Bankers Association, the British Standards Institute, the European Banking Authority, the Financial Conduct Authority, HM Treasury, Innovate Finance, the Payments Council, techuk and VocaLink. 2

3 2. About our response to your report 2.1 We wholeheartedly welcome the thrust of your report and share its general outlook 2.2 We have considered your four proposed remedies; in this submission we reply specifically only to C: Convenience Remedies, as it is those which most directly affect FDATA s members. 2.3 Our specific response to the three questions you raise under Convenience Remedies is contained in the paragraphs under section 5 of this submission. 2.4 In addition, we make a number of general points and observations in sections 3 and 4 below. 3. General points and observations 3.1 Market conditions Our members offer data aggregation services in all areas of financial services, including retail banking, loans, savings and wealth management The market for financial data openness and aggregation is far more advanced in other countries, most notably the United States, than it is here in the UK We believe this is to the detriment of personal and small business consumers, more of whom could and should be enjoying the benefits of the products offered by our members, such as product selection services, affordability checks, fact-finding on wealth management and holistic aggregation of day-to-day finances, which allow them to manage their money more easily even when held by different providers In this era of government, business, household and individual financial responsibility, products such as those offered by our members can provide a useful and vital service. 3

4 3.1.5 Innovation in the data aggregation sector is strong, but would benefit from a more helpful regulatory environment in respect of bank and financial institutions terms and conditions. We go into more detail in section 5, however we refer specifically to some banks and FIs frightening customers into rejecting the services of our members by making their use a breach of their account conditions. 3.2 Terms & Conditions Our members and other companies involved in financial data aggregation suffer from the restrictive Terms & Conditions (Ts&Cs) in place at many UK banks. Indeed, some of our members customers have been sent material from their bank explicitly advising that use of our services would breach the customer s Ts&Cs Our members internal research suggests that large numbers of consumers are, understandably, dissuaded from using their services as a result of these restrictive Ts&Cs It is our view that consumer financial data is owned by the consumer, not by his/her bank. We believe, therefore, that consumer access to, and use of, that data should be unhindered. 3.3 Security We note that our members and their technical partners existence depends entirely on security - without bullet-proof data security and protection procedures our members businesses would be destroyed We are aware of no single fraud or breach of data security as a result of any of our members or indeed any other supplier of financial data aggregation services in the UK Some of our members, in a meeting with FCA officials, have detailed the procedures they undertake to ensure complete data security. All members are content to share their procedures with the FCA on a private basis. 4

5 3.4 Standards We hope and anticipate regulation emanating from the UK and the EU which supports the fintech industry more generally, and specifically assists our members to provide innovative financial applications and services to empower consumers and small businesses to make better financial decisions In that expectation, we intend to play a role in creating a set of minimum industry standards governed by a code of conduct. We wish to do this by coalescing government, regulators, financial services organisations and other fintech organisations so that the industry as a whole can be confident in its veracity Earlier in February we held an exploratory meeting with the British Standards Institute to ascertain how this agenda could progress. Later this year, we will convene a round-table meeting, to which the FCA will be invited, to advance this agenda We envisage a possible scenario where membership of FDATA could become a kitemark for businesses operating in the sector. This type of protection regime would give customers confidence in the legitimacy of their provider, and give financial institutions confidence that the 3rd party aggregator can be trusted with financial data. 4. Other reports and submissions 4.1 In addition to responding to the your report, we will submit evidence to HM Treasury on data sharing and open data in banking, on 25th February We note, in general terms and because of their relevance to our response to your remedies, the following sections of the Open Data Institute (ODI) s report for HM Treasury on data sharing and open data for banks, of September 2014: Chapter 7, key message 4: Non-bank experts that we spoke to said consistently that the cost of implementing data access is unlikely to surpass 1m for a bank. Banks were less confident about likely costs, but thought that the figure would be much higher. 5

6 4.2.2 Chapter 7, key message 5: Informed sources assert that is possible for implementation to be completed from start to finish in less than 12 months. Longer processes may reflect the speed of banks internal decision-making processes rather than the amount of time needed for technical implementation. 4.3 We also note, in general terms and because of their relevance to our response to your remedies, the following sections of HM Treasury s Autumn Report of December 2014: Paragraph 1.168: The government is determined to support a more competitive banking sector where new banks, alternative providers and financial technology (fintech) firms can thrive alongside the established players, competing to offer new and improved services to customers Paragraph 1.169: The Competition and Markets Authority s (CMA) announcement of a market investigation into banking builds on a wide-reaching programme of government reforms to address competition issues and make the UK the leading global hub for fintech companies Paragraph 1.171: The government is also announcing support for all alternative finance providers by naming the big banks that will be required to open up access to their credit data and refer on any SMEs that they turn down for finance, and support for fintech firms who want to use bank data to help consumers and small businesses make better decisions. 4.4 We further note, in general terms and because of their relevance to our response to your remedies, the following sections of HM Treasury s call for evidence on data sharing and open data in banking, and associated comments from City Minister Andrea Leadsom MP, from January 2015: Paragraph 2.2: The publication of more open data by banks could provide alternative finance providers and fintech firms with a richer source of information to make effective lending decisions and to make better use of customer bank data Andrea Leadsom MP: Key to our long term economic plan is making Britain the global centre for financial technology, or FinTech, and innovation. Making it easier for 6

7 customers to use their data in more effective or creative ways can help achieve this, and we think the benefits and opportunities for customers could be huge. 5. Specific response to C: Convenience Remedies 5.1 What views are there on the issues in paragraph 9.79? both the potential usefulness to consumers of such services as well as the potential risks Many of our members provide personal consumers and small businesses with personal finance and wealth management platforms which help then view and manage the finances, held by a range of different financial institutions. Consumers use our services to make better day-to-day decisions and to gather more knowledge of the availability of different financial products and suppliers Our members platforms can be of significant practical use to personal and small business consumers, and here we offer three basic examples of the many benefits our members services can offer: (a) by aggregating savings and debts, consumers can create an overall analysis of their financial situation; (b) consumers can use our members tools to analyse whether it is more efficient to save or to pay off credit; (c) our members platforms can be used to check whether the savings or lending rate they are achieving on a product could be bettered elsewhere There are two identifiable risks associated with our members services. (a) Most obviously, there are operational risks associated with the use of financial data in respect of securing that information and protecting the company in the event of a breach. However, as previously intimated, we are aware of no single instance of this by an aggregator in the UK. Furthermore, the minimum industry standards we seek would mitigate this risk; (b) An accurate holistic view of a person s finance can be jeopardised by user failure to add all 7

8 the accounts to the portal, by the account being held offline and not updating, and by financial institutions making the aggregation process difficult the potential level of interest and the nature of services that could be offered by existing aggregators and other potential market entrants offering similar services We see huge market potential for the services of our members in the UK, largely because anyone with access to online banking can access the services and benefit from them As we have mentioned above, the United States market is far more developed despite being only around 10 years old. There is deep market penetration with tens of millions of consumers benefiting from the services without the barriers we experience in the UK whether there are any regulatory barriers to entering the market that could be lowered by the FCA to facilitate the development of such services Notwithstanding any regulatory changes emanating from Brussels through PSD2, we believe the FCA can play an important role in opening up this market. There is a discussion to be had about regulation and/or accepted standards of practice both of banks and financial institutions and for market participants in the fintech aggregation sector The FCA could oversee a new regime where banks and financial institutions: (a) revise those parts of their Ts&Cs which frighten consumers to the degree that they decide not to use our members services; (b) make all accounts available online and therefore able to be aggregated; (c) provide web services to allow access to consumers, via aggregators, to their statements Similarly, the FCA could enhance the credibility and legitimacy of the industry, and ensure personal and small business consumers understand that aggregators operate within the law and to exacting levels of security and protection, by requiring industry operators to: (a) meet the agreed standard, which as previously mentioned FDATA would like to help create; (b) be checked to an agreed regularity to ensure that they continue to comply, on threat of 8

9 being banned from aggregating; (c) be certified by a relevant body or authority as a trustable market participant (also mooted in an earlier section of this paper). 5.2 Which are the most significant of the barriers described above and what action can the FCA take to help reduce these? In response to your paragraph 9.83, we believe there are three significant barriers to the industry releasing its full potential. The first of those are the bank and financial institution terms and conditions, as we have detailed above. Secondly, and related to the Ts&Cs issue, consumers are uncertain about where they would stand in a situation where there was some financial loss (an issue the development of which FDATA members would be happy to discuss). Finally, and again inter-related, the lack of a clear set of standards and code of practice limits the progress of the industry With respect to your paragraph 9.85, relating to the action the FCA could take, we would make several observations Firstly, we believe more recognition should be given to the reality that there has, so far as we are aware, never been a breach of security or a fraud as a result of financial data aggregation in the UK. The practice is in breach of some banks Ts&Cs, but such is its usefulness that our members customers choose to ignore their banks advice and accept the small element of risk which is inevitable when data is shared We are comfortable with a range of technical data-sharing solutions, including APIs. However, since APIs, for instance, are not universally available we believe that they should co-exist with the system of credential sharing (or screen-scraping) that our members are currently utilising. We would be extremely concerned if aggregators were forced to change the platform for existing customers as a result of any banning of credential-sharing; the cost to current market participants of building a customer base has been significant, and to add further to this would seem to be an unnecessary burden in a post-regulatory, standards-driven environment. 9

10 5.3 Are there any additional barriers to solutions emerging? Does the scope of the FSCS have an effect on consumers behaviour? We see no additional barriers to the progress of this industry other than those already outlined Consideration could perhaps be given to the extension of the FSCS s remit to consumers who have used aggregation services such as those provided by our members for any of their UK-held accounts. 10