Who should have access to our financial data?

What if each one of us could have our personal vault of financial data and we could choose who gets to have access to it and when? Better yet, what if we could get royalty via smart contract every time our data is used by a third party?

Financial data is often the most intimate information we have besides our health information. Isn’t it strange that none of us own that data? Most of us don’t know where our financial data is being stored and how it is being monetized.

Financial organizations may claim that they disclose everything about their data collection and sharing practices. But that’s just “finsplaining.” A term coined by one of my friends after the word “mansplaining.” Most U.S. consumers do not read multi-page, small print disclosures and have no idea what is happening with their financial data.

Why should we care?

By now we have been trained to think about credit score, good credit, bad credit. Most people become aware of their credit score when they need a financial background check, for a rental apartment, a car loan, or something similar. In reality, people start creating financial data as soon as they sign up for a cellular phone, or open a bank account.

Consumers should be aware of the data they are generating and own it. Ideally, this would create more awareness and prevent people from making costly mistakes. Some of this data is with credit bureaus which make the data available to customers at regular intervals. Credit data is just tip of the iceberg.

There is data about all kind of financial transactions like direct deposit to bank accounts, utility payments, check payment, locked away in various databases. The worst part is that consumers have no idea what data is out there about their life.

For example, if someone bounced bill payment checks because they had little money in their bank account, this person doesn’t know about databases held by third parties processing bill payments. Minimally, consumers should know that not only the bank and recipient of the bounced check are aware of insufficient fund in the bank account, a totally invisible third party is storing and selling the data to other potential check recipients.

Similarly, data being locked away at individual institutions limit customers’ choices. Consider someone who has banked at an institution for 5 years. That data is locked in that bank’s general ledger. There could be important information about bank balance, transaction history, which could show this person’s financial prudence. If the person applies for a personal loan at another lender, he or she doesn’t get benefit of already existing rich financial data.

To alleviate some of these issues, many lenders use services like PLAID, which helps with transferring data from one financial institution to another. It is accepted norm to allow services like Plaid to get customer data, but there is no regulatory requirement for a financial organization to allow this data transfer to another organization.

What could be a better way?

Goal 1: Collect users’ financial data in one place.

There is already a prototype of this based on how open banking is being implemented in UK. Consumers can now give third parties access to their data without giving away their account credentials like password. This is a more secure way of sharing data that benefits consumers.

The only piece missing in UK’s proposal is that consumers themselves do not have access to their data unless a third party makes it available to them. Clearly, these services would charge the consumer to showcase their own data. This is a bit like losing access to your own self storage unit. You filled the unit with your stuff but now it is off limit to you and one must pay a third party to get a picture of what’s inside. This does not feel right.

Goal 2: As original data owners, consumers should get royalty from data monetization.

Somehow the concept of ownership has never been extended to our data. Third party aggregators, credit bureaus, platforms are monetizing our data without paying royalty to any of us. It is fair to expect voluntary data sharing when a consumer is seeking a benefit like rental application, loan application, leasing a vehicle. In many of those cases, in addition to making own data available, consumers pay a fee for the privilege of application.

But organizations use consumer financial data to create targeted ads, mailing campaigns and the royalty goes to the data provider. Going with the storage unit metaphor, someone is selling the contents of the storage unit without sharing any of the proceeds with the person who made the items originally.

This too can change if we can harness the positive aspects of blockchain. Financial data can be stored in blockchain with a smart contract where every time someone uses that data, royalty in the form of token or cryptocurrency goes to a designated consumer wallet.

If you think this is far-fetched, consider that Estonia already uses blockchain for its govt. issued ID. Blockchain is more hacker proof than current centralized databases. Smart contracts will make micro (e.g. fraction of 1 cent) payment to millions of people far easier and seamless.

I want share of the revenue my data generates. Why isn’t it the norm?