As the consumer data privacy debate moves from the living room to the boardroom and the boardrooms of Capitol Hill, more companies are seeing the business potential of data portability.
Use cases range from loan applications to switching banks – and far beyond into new forms of digital marketing powered by targeting and data segmentation.
As things stand, 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 applying for loans or changing banks generally do not want such obligations.
“The only thing that bothers me as a consumer [is that] when you apply for a loan today, you must wait for the bank [contact] the middleman, who partners with the payroll company, and then an invoice for $50, $60, $100 will be passed directly to you,” he said.
“It’s kind of funny that as a consumer I give you permission to access my data, you access my data, then you give me a bill,” he told Karen Webster.
Citadel’s solution is to cut out the middleman, leaving its payroll application programming interface (API) to work behind the scenes to move data where the consumer wants it sent in a frictionless, free process.
“Our team is all about user experience,” he said. “I built my career in the product. It’s really easy to get stuck in architecture and thinking about how to build the best system, but what we should really care about… is how to build the best user experience? »
Citadel API partners with financial institutions (FIs) and payroll companies, providing an online portal where consumers connect and authorize data sharing whenever and wherever 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.”
It’s all about permission
A typical scenario for Citadel is a consumer applying for a loan. “The lender needs to verify your income and employment, and we’ll connect to the payroll provider on your behalf, pull the data, normalize it, and send it back instantly to the company that needs it. It’s a very seamless process and effective,” Klokov said.
Many of Citadel’s lender customers white-label its solution, so the API works behind the scenes from the consumer’s perspective, although they must agree to a joint privacy pact 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 the approach,” he said. “Our approach is completely consumer-driven. If the consumer wants to get a better loan – and that’s what I think about all day with our clients who are primarily lenders and background check companies – how does the consumer can he get… a better auto loan, a better mortgage, etc. The approach we’ve taken is very transparent.
He said that “even if the regulations will come [in the U.S.], we just come up with a very different view of the solution. It’s transparent and user-friendly.
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 consumer-friendly way. This has major potential for the underbanked – as well as the vast number of people without the best credit histories who have held for some time.
“Verifying employment and income changes the dynamic for people who don’t have a credit history,” Klokov said. “If for some reason you’re underbanked, or you don’t have the best financial discipline but you 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 cut off 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 Executive Order from July calling on the Department of Justice and the 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 officials are therefore placing greater emphasis on how data is shared between banks, particularly how it is made available to consumers.”
This touches on one of Citadel’s other core services – easy direct deposit switching.
All of this points to a future of consumer data ownership where all players are winners.
“I think we’re going to move away from companies trading data behind your back to a situation where you have solutions like ours and other solutions that are consumer authorization, and you end up having your own repository of data you can 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®