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Wells Fargo: Banks need to create data exchange standards

Wells Fargo is trying to establish itself as the leader of a movement to give banks’ customers control over their data and how it’s used.

The first step, according to Brett Pitts, head of digital for Wells Fargo Virtual Channels, is to come up with cross-industry standards for moving data to different parties.

“This will be successful if more banks, more aggregators, more fintech firms wind up signing into these kinds of agreements, and figure out an open standard way of passing data and keeping customers at the center of discussions,” Pitts said of its data-exchange agreement with data aggregator Finicity, announced earlier this week. “Ultimately, this isn’t going to work if its just Wells Fargo, Intuit and Finicity doing it.”

The agreement allows Wells Fargo to share its customer data with Finicity using application programming interfaces. The bank made similar agreements with Intuit, which owns QuickBooks, TurboTax and Mint, in February and with Xero last summer. This week’s agreement is different in that it allows Wells to move data to third-party fintech apps that work with Finicity, whereas the agreements with Intuit and Xero allow them to use customer data on their own financial applications.

Right now the most common way of accessing customer data is through a method called screen scraping: customers log into the third party site or app with their bank credentials and that company “scrapes” the information to be able to log in as the customer to retrieve account data as necessary.

“Screen scraping is the anti-pattern we want to stop,” said Pam Dingle, principal technical architect at Ping Identity, a maker of identity management software. “By sharing their passwords, customers are allowing the third parties to be them – transfer money, take out loans, literally do everything the customer can do. These passwords are stored in a format which allows them to be used, so a breach at the third party is a breach of the bank account.”

Intuit also established a data sharing agreement with JPMorgan Chase in January; in February Silicon Valley Bank and Xero made a similar move. Wells’ arrangement with Finicity is the third such agreement, but Pitts indicated the bank doesn’t plan to stop there.

“We have lots of these kinds of conversations in the pipeline right now,” Pitts said. “Early on it’s important for Wells that we show leadership, that this is possible, that we build momentum through these kinds of agreements and they’re used as a catalyst for creating an industry standard ways of doing things. We’re hoping this can constitute a sort of tipping point.”

When Wells Fargo announced its agreement with Xero it framed it as one that takes a stand against the more common practice of screen scraping. Its progress in establishing more agreements with more data companies has “felt a little bit slower than what we would have liked” because of the variety of business models among various aggregators, Pitts said.

Now Wells is hoping over time its campaign to end screen scraping becomes better understood and more easily replicable by others, by making sure its different arrangements can have have as many common elements as possible on the technology side, Pitts said.

“The strategy is to really provide quality access and quality data for consumers financial records,” said Finicity CEO Steve Smith, “to digitize and speed up the existing process thats been out there for a long time and enable speed, security and convenience of financial records.”

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10 years on: Once a first mover, Mint must work to stay relevant

Mint was an instant hit when it launched 10 years ago. It came out of nowhere, making something boring but important like budgeting kind of fun. It was easy to use, and best of all, it was free.

It was so full of promise it exceeded its new user acquisition goal of 100,000 in the first six months — by 10 times that. Two years in, it hit 1.5 million and was sold to the data aggregator Intuit for $170 million. It hasn’t had much in the way of competition — until now.

Mint today is a mobile app working to stay relevant in a sea of similar personal financial management (PFM) apps, such as Moven, Clarity and Penny. The popularity of such apps has increased over the last two or three years and will probably continue to do so with the rise of digital assistants like Siri or Alexa, automated savings and investment apps and an overall financial services shift toward customer self-service and control over their money.

Mint still stands out from the crowd, but it hasn’t been able to attract new users like it used to, said Stephen Greer, an analyst in consulting firm Celent’s banking practice. People who like managing and tracking their money carefully tend to check their accounts more frequently today than they did 10 years ago which is running Mint into the same wall blocking all PFM apps: getting secure real time data feeds from the financial institution.

“For a while, Mint was the best on the market because it was the only one on the market,” he said. “It did a good job for a while but the biggest issue for Mint, and one reason it’s gone downhill, has always been the aggregation piece. If the site isn’t accurately reflecting your spending – if it’s not live, it’s not real time, you see discrepancies – you’re most likely not going to use that service.”

Mint now has more than 20 million customers, according to an April 2016 blog post. It hit 10 million users around Aug. 2012. Mint did not provide growth figures over the last 10 years by deadline.

That friction also creates a sort of set-it-and-forget-it mentality, said Tiffani Montez, a senior analyst with Aite Group.

“One of the challenges is [PFM] is like a shiny toy,” she said. “If you try to combat the set-it-and-forget-it mentality you have to be able to provide some additional value that deepens the relationship.”

That may require a smoother flow of customer data between the customer’s bank and PFM app, like the ones Intuit just won from Wells Fargo and JPMorgan Chase. Earlier this year it reached deals with both banks that should theoretically help reduce some of the friction around data sharing. According to the agreement, Chase customers can authorize the bank to share their data electronically with Intuit’s apps: Mint, TurboTax and QuickBooks. Before, customers would give third parties their online banking passwords so they could log in and import customer account information.

Many banks have claimed that common practice compromises cybersecurity and in 2015 several of them, including JPMorgan, temporarily suspended customer data access to third-party data aggregators like Intuit.

However, how much data gets shared is unclear, Greer noted. The banks can probably share basic transactional information like how much money a customer spent in a given period or the current account balance, but might not reveal how much interest a customer is being charged on a credit card or what kinds of fees he or she is paying.

Mint said while it’s always been good at tracking and insights, it is now focusing on moving into transacting on users’ behalf, beginning with its bill pay functionality.

“In the past you got that insight but you had to take action yourself,” said Kevin Kirn, head of product for Mint. “Bill pay is just the beginning of that journey from insight to action. All our teams are looking for ways to connect that action experience through Mint.”

Perhaps the data sharing agreements will help Mint in creating more and more action experiences, but Greer is skeptical.

“Opacity is in their best interest and withholding a lot of that data works in the financial institution’s best interest,” Greer said. “My curiosity is in how much information they’re actually getting through this ‘direct connection’ and what that entails. My skepticism is around how much value that provides. I’m willing to say its not as much as it could be.”

That’s because even with the agreement, Mint is a direct-to-consumer product. Today there are plenty of companies that sell their PFM solutions to the banks themselves, aggregators like Yodlee, MX and Plaid that provide more value to the bank than Mint does. Mint makes money off its consumer business. When it comes to advice, it makes recommendations in customers’ best interest – and not necessarily in the best interest of the banks.

About a year ago Intuit shut down its financial services aggregation services, probably so it could access a market of direct connections – like those with JPM and Wells – and direct links to feed its specific services, like Mint.

“There’s just more value they can provide,” Greer said of the MXs, Yodlees and other direct-access data aggregators and infrastructure providers. “Mint hasn’t provided a whole lot of value to institutions and banks don’t want to play that game. They’d rather cut off the aggregator from getting data on consumers so the service will buffer – that’s essentially what’s happened.”

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To drive loan originations, BlueVine uses partnerships like the one it recently signed with Intuit

In October, small business lender BlueVine announced that it had closed a deal with Intuit to offer its line of credit product inside the software firm’s QuickBooks financing platform. The partnership allows small businesses that use QuickBooks to use their business data to quickly apply for a line of credit up to $100,000. Thousands of small businesses have already used BlueVine’s Flex Credit since it first launched in April 2016.

Alongside inbound and outbound marketing, these types of collaborations are crucial to help generate loan origination growth for BlueVine. Partnerships like the Intuit one drive 60 percent of the traffic to the company’s website, according to CEO and founder, Eyal Lifshitz. They’re also a defensible channel for BlueVine, which has focused on creating a growing volume of smaller partnerships before landing the recent Intuit collaboration.

The long tail of distribution partnerships are important for online lenders because they’re hard to replicate, while they also remove the risk of relying too heavily on a large partner whose strategy can change over time. Big headline-grabbing partnerships are important, too, because they provide credibility and volume, helping to set up similar strategic partnerships in the future.

It’s a win-win for companies partnering with online lenders. They’re frequently looking for value-added services to provide to their customers. Lending, for firms that service SMBs, is a common addition.

“Intuit is a software company, which makes their financing platform more valuable to customers,” said Lifshitz. “Partners want to distribute the best products because lending is an efficient market. I just believe we have the best product and experience.”

Founded by Lifshitz in 2013, BlueVine began as an online invoice financing lender, modernizing a very paper-intensive, back-office type of financing for small businesses. After listening to customer feedback, Lifshitz became convinced that there was something much bigger afoot.

“Customers don’t think of their needs in terms of specific financial products,” he explained. “They have a problem — cash flow — and they need help now. So for BlueVine, we started thinking about how we can help them solve that problem through innovative products and technology.” The line of credit product was launched in April of 2016 and more lending products will follow over time.

Intuit’s QuickBooks financing platform, on which partners have to date originated over $500 million in loans to SMBs, typically offers just one or two options in each lending category. This means newer fintech firms that partner with the firm must scale quickly. BlueVine joins OnDeck as the other line of credit provider. Though informal discussions started about two years ago, Intuit took eight months to conduct diligence on BlueVine.

Ultimately, what drives advantage in acquisition for firms like BlueVine is a differentiated product. But Lifshitz cautions focusing too much on acquisition costs as a sole metric of success. Instead, lenders should also consider customer retention.

“Acquisition cost has no meaning as a standalone number,” he said. “Retention is a way to differentiate as well. Too many firms in our space think only in loan units, not the total customer experience. You need to think about whether a customer really loves what the service you’re providing.”

As a software provider, Intuit has a lot of experience partnering with young upstarts. Lifshitz credits his firm’s maturing compliance process with helping to land strategic partnerships. “We raised capital last year from Citibank and they’ve helped us mature our compliance program,” he said. Having a more mature compliance program makes it easier to get distribution deals done with larger partners.

Additionally, scale is important when partnering with a company the size of Intuit. Partners need to feel that the companies they work with can deliver on the added demand they generate. There are 5 million QuickBooks users. At 100 people and growing quickly, BlueVine is ramping up.