JPMorgan Chase is planning to ban fintech apps from using customer passwords to access their bank accounts
JPMorgan Chase is planning to ban fintech apps from using customer passwords to access their bank accounts and data, according to the Financial Times.
Instead, the banking giant is working on a system that uses tokens to send third parties a narrower range of data in a secure form, per Chase’s head of digital Bill Wallace, cited by the FT. There is no date set for when Chase is looking to completely ban password-based access, and the bank pointed out that the new system doesn’t aim to deter customers from moving to new platforms.
- The motivation behind the new system comes from security concerns. JPMorgan Chase & Co’s chairman and CEO Jamie Dimon first warned about the dangers of data sharing in a shareholder letter in 2016. He voiced concerns about third parties selling or trading customer information in ways that they might not fully understand — particularly since few people read privacy statements.
- It already tested the solution with third parties, and more companies are set to follow soon. Account aggregation fintech Yodlee has become the first company to use such tokens for 100% of its interactions with Chase. Additionally, Plaid — a US fintech that enables consumers to connect their bank accounts to other financial services providers via APIs — signed up to start using tokens to access data on behalf of many third-party apps.
Addressing potential security concerns around sharing data between banks and fintechs will help the latter harness more data from banks to boost their own services. Amid a global open banking push, data sharing between banks and fintechs will become table stakes, putting consumer data security in the spotlight.
Chase is seemingly cognizant of this inevitability since it’s launching a system that provides consumers with a safer data-sharing option, and more banks will likely take steps to open up their data in a secure manner. Additionally, Australia recently delayed the implementation and launch of its Consumer Data Right (CDR), which will let consumers allow their banks to share their data with third parties, from February to July 2020 to better ensure necessary security and privacy protections for consumers.
While such efforts to enhance security could make open banking adoption from consumers slower in the short term, it can also help increase confidence in the long run, as consumers will likely be more willing to share their data. This will boost fintechs’ competitiveness because they’ll be able to access a wealth of data, allowing them to better personalize their solutions, and attract more users, since data sharing will help smooth out the consumer onboarding process by enabling pre-populated applications, for instance.
This article originally appeared on forbes.com To read the full article and see the images, click here.
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