Financial Account Aggregators

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From the course by Duke University

FinTech Law and Policy

21 ratings

Duke University

FinTech Law and Policy

21 ratings

Being a successful FinTech firm requires more than just great technology; it also requires an understanding of the laws and regulations applicable to your business. This course will provide you with that understanding. You will learn about the critical legal, regulatory, and policy issues associated with cryptocurrencies, initial coin offerings, online lending, new payments and wealth management technologies, and financial account aggregators. In addition, you will learn how regulatory agencies in the U.S. are continually adjusting to the emergence of new financial technologies and how one specific agency has proposed a path for FinTech firms to become regulated banks. You will also learn the basics of how banks are regulated in the U.S. If you are unfamiliar with how these new financial technologies work, fear not. We will begin each new course section with a high-level overview of the underlying technology. While the course is principally focused on the U.S. FinTech industry, we cannot possibly cover every relevant legal and regulatory issue. Therefore, this course should not be construed as legal advice. Rather, the goal of the course is to familiarize you with the key legal and regulatory challenges FinTech firms in various sectors face, as well as the critical policy debates that are occurring in Washington D.C. and state capitals across the country.

From the lesson

FinTech Payments, Wealth Management, and Account Aggregation

The final module begins with an overview of the legal framework applicable to legacy payment systems in the U.S., followed by a review of how some FinTech firms are building on top of these systems to provide faster, more convenient, consumer payments while other FinTech firms are bypassing these systems all together by utilizing distributed ledger technology. From there we examine new technologies being deployed in the wealth management industry, including the use by some firms of “robo-advisors” to allocate investors’ portfolios using algorithms based on the investors’ data and risk preferences. You will see that robo-advisors are subject to the same oversight as traditional investment advisers. The module concludes by exploring the legal issues surrounding FinTech companies that allow consumers to aggregate the information from their various financial accounts.

FinTech Wealth Management12:43

Financial Account Aggregators3:58

Meet the Instructors

Lee Reiners, CFA
Executive Director, Global Financial Markets Center
Duke University School of Law

In this final lecture, we will look at some of the risk and

legal issues associated with financial account aggregators.

As the name implies,

these companies allow consumers to aggregate the information from

their various financial accounts including

their assets and bank accounts and brokerage accounts,

to enable them to better see their financial health and receive

advice on alternative ways to save money or manage your finances.

Account aggregators allow consumers to access their information either online or on

mobile devices and some of

the more well-known firms providing the service include Mint and HelloWallet.

While count aggregators certainly provide a convenient service.

They also pose unique risks that consumers should be aware of.

The main risk is that consumers could potentially be more exposed to losses due to fraud.

If a consumer authorizes an account aggregator to access their financial accounts,

and grants the aggregator authority to make transfers,

the consumer may be liable for fraudulent transfers made.

Market participants do not agree about whether consumers using

account aggregators will be reimbursed if

they experience fraudulent losses in their financial accounts.

Some banks have even stated publicly that they may not

reimburse losses from consumer accounts if the consumer

provided his or her account credentials to

an account aggregator if

fraudulent activity subsequently occurs in the consumer's account.

The relevant regulatory agencies don't see eye to eye on this issue either.

In 2017, the Consumer Financial Protection Bureau

issued non-binding guidance which stated that

consumers should have reasonable and practical means to

dispute and resolve instances of unauthorized transactions.

Federal reserve on the other hand,

has suggested that industry stakeholders will need to come to

an agreement on which party bears responsibility for unauthorized transactions.

Another risk associated with account aggregators is

that some firms may hold consumer data without

disclosing what rights consumers have to delete

the data or prevent the data from being shared with other parties.

However, the Gramm-Leach-Bliley Act of 1999,

generally requires FinTech firms and

traditional financial institutions to safeguard

nonpublic personal information about customers.

Because of these risk, several large banks have intervened at

times to limit the flow of information to some account aggregator websites.

This occurred in late 2015,

when several big banks including JP Morgan, Bank of America,

and Wells Fargo express concern as

the aggregator sites could threaten consumers' account security and that

these services overload bank websites at busy times by

requesting updated information about consumer accounts from bank servers.

Well, these concerns may be valid.

It's important to keep in mind that banks also have a competitive incentive not to share

their customers data with tech-savvy FinTech firms who can

potentially utilize the data to provide superior products or services.

To address some of these issues,

several financial institutions have negotiated

contractual arrangements with individual account aggregators.

For instance, in 2017,

JPMorgan Chase and Intuit which owns

mint.com TurboTax and QuickBooks reached an agreement to

allow the bank's customers to check account information on

their technology firms sites without sharing their Chase passwords.

To do this, JPMorgan Chase customers authorized the bank to

electronically share their financial information

with Intuit's financial management sites,

and the data is shared in Application Programming Interface or API.

This eliminates the whole process whereby customers had

to manually enter their Chase passwords into the sites.

As part of the agreement, Intuit agreed not to sell

customer data to third parties which has been a concern of many banks.

As more and more consumers continue to enjoy and

demand the convenience provided by account aggregators,

expect to see similar types of agreements between

aggregators and banks to become commonplace.

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