Plaid adds firepower behind its open banking agenda

• Plaid hired a new general counsel with both banking and government experience. 
• This decision highlights data-sharing fintechs’ need for experience in both arenas as banks wrestle with the development of API standards and the US government eyes rules that could muddy the waters.  
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Meredith Fuchs, a former general counsel for the Consumer Financial Protection Bureau (CFPB) and Capital One, is joining Plaid, reports American Banker.

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She was the CFPB’s general counsel from 2012 to 2016, and Capital One’s until July. With both government and banking industry experience to leverage, she will represent Plaid as a critical industry and government influencer: She’ll be central to negotiations with financial institutions as they wrestle with data-sharing principles and technology, and a powerful advocate for industry-led open banking as the CFPB starts to craft new rules on consumer-authorized access to personal financial data.

Private industry has driven the development of open APIs, but it should anticipate regulatory action. The Financial Data Exchange (FDX), a financial industry consortium with over 100 members, has espoused its own data-sharing principles. FDX and the Open Financial Exchange (OFX), another consortium, have also now agreed upon a single data-sharing standard. But the CFPB has shown that regulators will introduce more cooks to an already busy kitchen, adding government rulemaking to a winding negotiation between industry players.

As they develop tighter industry and government relationships, fintechs like Plaid will become more formidable — and merit even more serious consideration as partners to incumbent institutions. Screen scraping, the technique aggregators have historically used to amass customer data, for some time granted fintechs unfettered access to all of a customer’s financial data.

Financial institutions have clamped down on this practice, encouraging or requiring aggregators to access customer data via APIs — retaining their power over consumers’ financial data. But data-sharing fintechs that closely partner with or are acquired by large players in the financial industry are woven into the existing financial ecosystem, making the former hard to ignore: Visa launched into the market for data sharing earlier this year with its acquisition of Plaid, and Mastercard followed in June, announcing it would acquire Finicity.

If they gain clout with regulators, these fintechs could pose a greater threat to banks should they push for government-mandated third-party access to consumer-permissioned financial data.

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