‘A network problem needs a network answer’: Akoya’s Stuart Rubinstein
- 11 major banks, plus Fidelity and The Clearing House, have invested in Akoya.
- The new financial data network expects to have half the deposit accounts in the U.S. connected to the platform next year.
Stuart Rubinstein, CEO of Akoya, joins us on the Tearsheet Podcast today. A spin out of Fidelity, Akoya is a financial data network that lets the customers of financial institutions grant and revoke third party access to their financial data safely. Akoya facilitates this access and eliminates the need for consumers to share their user IDs and passwords.
Stuart talks about Akoya’s roots and how he’s been thinking about data aggregation for years. He discusses the need for APIs to move beyond the era of screen scraping. Rubinstein also shares his view of open finance and Akoya’s future.
Growing up in financial services
I’ve been thinking about data aggregation going back to the 90s and early 2000s. In the 90s, I worked for an asset manager, which was owned by Mellon Bank. I was actually at the first meeting where Intuit told the banks that they were going to start downloading bank data into Quicken. That was the first attempt to take financial data and bring it into an app.
Fast forward, and what started as kind of a connection turned into screen scraping. Akoya started as a way to move away from screen scraping. It started at Fidelity Investments as a way for Fidelity to build its own API and provide clients, who want to provide access to their data to third party apps, a way to do that without having to share their credentials.
What we found was every financial institution, every data aggregator, every fintech was facing the same problem. So it really is not a one company problem. It’s actually a network problem. It’s an industry problem. A network problem needs a network answer. And that’s what we’re developing.
Spun out of Fidelity
Back in February, 11 banks invested into Akoya alongside Fidelity. There were 12 financial institutions plus The Clearing House, which is another consortium of banks. They all bought in, so all those financial institutions are now equal owners of Akoya, which operates independently from all of them.
Those institutions all sit on the Board of Directors and we present to the board like any other company might. But we operate independently. It’s management’s responsibility to develop the products that meet the needs of our clients. And our clients are on all sides of the issue. They are financial institutions: banks, brokerage firms, insurance companies, mutual fund companies, retirement plans, record keepers, they are data aggregators, who have downstream clients that are financial apps that need access to data or they are large fintechs themselves who want to come to us directly.
Big banks as senders and receivers of financial data
As we start peeling back the onion more and more, we find that a lot of companies want to be on both sides of data aggregation. They sit on financial data — even fintechs, if you think about a payments platform or peer to peer payments, they have lots of transaction data that clients might want to use somewhere else. As we mature, we find that people want to be on both sides — we call them data providers and data recipients.
Move to APIs
There are a few large banks that have done some bilateral negotiations with data aggregators and large fintech. There are a handful of large banks that have some APIs in place. The vast majority of the institutions, though, just don’t have the resources to do that on their own. So, screen scraping is still extremely prevalent. The Financial Data Exchange (I think you know, Don Cardinal there) was started to bring the industry together to rally around standards for APIs. And that group has made a lot of progress. Representing Fidelity, I was a founding board member to that group.
The reason, one of the primary reasons, it’s been slow is because of agreements. Every bank, brokerage firm, or other kind of financial institution has been negotiating one-off agreements with each data recipient. That is slow and expensive, and just not standard. It’s not scalable. That’s a problem that Akoya was meant to address — to create standard network operating agreements, standard network operating rules, so everybody who connects to the network plays under the same rules.
Data network vs. data aggregator
Akoya is a little different than than data aggregators. It was built to be a network, a network and delivery service. So a client connects data recipients, the fintech apps and data aggregators, with data providers. It gets access to the data. The consumer has permission — it’s always consumer-permissioned data. It provides tools to the FIs, so the FI can help their consumers enable account access at the account level.
We don’t store any data. We operate strictly as a pass-through model. So there’s no data storage, there’s no use, there’s no resale of data, there’s nothing that goes on. We don’t even know who the consumer is. We use anonymous IDs and tokens. We’re not tracking their data. We’re not building up any big warehouse that could be a potential issue in the marketplace.
Where we think the data aggregators add a lot of value is in data services. Akoya is meant to be the network to bring the data to them. The consumer permissions that the data aggregators can provide those advanced analytics, enhance the data, normalize it, standardize it — all those kinds of things that they do — so the recipients get data in a consistent format, even from different parties. That’s where we think we cooperate.
Fintech demand for data
On the demand side, we’ve seen demand for data continue to grow over the years. Innovation has been off the charts over the last decade or two in financial services. Even when you think you see an industry that is mature, then we see a new player emerge with a different twist on it. I see innovation continuing to grow. What I get concerned about is ensuring security, safety and transparency at the same time.
As data flows even more, we need to make sure it’s done in a safe, secure and transparent way. At our old firm, when we surveyed consumers why they didn’t use fintech apps, what we found was the number one reason was because they had to share their ID and password for their financial accounts.
A lot of financial firms, in one breath, tell people never to share their ID and password. And in another breath, they’re like, if you want to use this app, you have to share ID and password. It doesn’t make any sense. To really accelerate innovation, we have to improve on data access.
Priorities for 2021
As we embark on this chapter of Akoya, 2021 will be about data supply. It will be about getting FIs connected to the platform. We expect by the middle of the year to have more than half of the deposit accounts and around half of the credit card accounts in the country connected to the platform. Then we can focus on the demand side. We can start to focus more on data aggregators and other data recipients in large fintechs to connect to the platform and start to have that data flow that way. So, create the supply and create the demand and then get that flywheel spinning.