At Finicity, one of our catchphrases is, “better data, better decisions.” We know that greater access to personal financial data means improved quality of life. Today’s innovations using consumer data in the field of financial services, like those developed by Finicity, mean increased speed, convenience, and insights for individuals, families and organizations tomorrow. Their resources and product options will expand as banks, fintechs, and other key players compete for their business.
However, it is critical to frame this data-driven innovation with robust security and privacy protocols that consumers can trust. Building on the work of the Financial Data Exchange, Finicity advocates for five key principles in the use of consumer-permissioned data: control, access, transparency, traceability, and security. You can read more about our stance on these critical issues in our whitepaper, “The Empowered Consumer and the Future for Financial Data.”
Combating the Literacy Crisis with Consumer-Permissioned Data
Research shows that the United States is experiencing a financial literacy crisis. Although we are the largest economy in the world, we rank 14th when it comes to the proportion of adults who are financially literate. This is not a new problem. In 2008, the President’s Advisory Council on Financial Literacy stated:
“More broadly, the lack of basic skills such as how to create and maintain a budget, understand credit, or save for the future are preventing millions of Americans from taking advantage of our vibrant economic system. And tens of millions of our citizens are either unbanked or underserved, which leaves them outside the economic mainstream. Addressing these issues is critical to the future of our nation’s economy.”
One promising solution to this crisis is strengthening connections between consumers and third-party financial resources. The access to key financial resources and tools can be democratized when we give more people access to their data and to related resources. In the end, this results in greater inclusion in the financial system and greater access to financial wellness.
Take, for example, access to credit. We know that people with less access to credit are much more likely to face income volatility. With this volatility comes a dramatic uptick in reports of financial hardship. A quarter of adults who do not feel confident in their ability to get approved for a credit card report that they have experienced hardship from income volatility in the past year. On the other end of the spectrum, only 6 percent of those who are confident in their credit availability report similar hardship.
Gaps in access to what most would consider basic financial services, like bank accounts and credit lines, exist largely in already marginalized communities of minorities and those with low incomes. Because of this, people are left living from paycheck to paycheck, vulnerable to any unexpected bills. There is a clear correlation between access to credit and feelings of security and stability.
This is where the real potential of consumer-permissioned data lies. When we connect consumers to the numbers, figures, and reports that comprise their financial wellness, we connect them to the resources that help them save, invest, plan, and provide for themselves and those they care for. We connect them to possibilities. And with possibilities comes hope.
Read our whitepaper to learn more about the policies and strategies that will enhance the security of consumer-permissioned data solutions and drive innovation.