Open banking is most likely a backdoor to digital IDs

Turns out, convenience is the Trojan Horse of the control grid. Question is: Are you ready to do without if it comes down to it?

“Open banking is coming to the U.S.,” Quartz announced in a headline today. “What is it and are banks ready?” The article quotes experts who explain that this new form of data mining digital banking is a win-win-win for merchants, banks, and of course, customers:

“Open banking” allows anyone to share data from their financial accounts with third parties, like merchants, financial tech companies, or rival banks. For customers, it creates a way to easily compare bank offerings, transfer their bank accounts, and get an overview of their finances. (If you’ve ever been prompted to give another app access to your bank, then you’ve already used open banking.)

It’s also a way for banks — and merchant partners — to leverage large stores of data to boost their revenues and expand their offerings.

You may not like the sound of it, but open banking appears to be inevitable. The Quartz article explains that late last year, “the Consumer Financial Protection Bureau (CFPB) issued the Personal Financial Data Rights Rule (1033), which requires banks and other payment firms to share transaction and account data with customers and authorized third parties. The rule also requires that third parties establish obligations for accessing a consumer’s data, including privacy protections for that data, and provide basic standards for data access.” The rule goes into effect later this year, leaving U.S. banks scrambling to “become compliant and develop a roadmap for open banking.”

Governments and industry are using terms like “fairness,” “inclusion,” and “convenience” to sell consumers on the concept of opening up their private financial information to third parties.

The outer ring of this infographic is where open banking may lead.

For example, here’s how the Canadian government is spinning open banking as both an issue of fairness and convenience:

In proposing a new Canadian Renters' Bill of Rights, Prime Minister Justin Trudeau suggested that timely rental payments should be used to calculate a person's credit score.

“It makes no sense that someone who pays $2,000 in mortgage every month gets credit for it, but someone who pays $2,000 in rent every month and is diligent about it and responsible doesn’t get any kudos for it.”

Open banking, then, creates an easier pathway to home ownership for renters.

“Rent reporting doesn’t work without open banking,” said Andrew Graham, CEO of Borrowell, a Canadian company that provides access to credit education, innovative digital tools, and personalized experiences. In a recent op-ed, Graham wrote:

A simple way to look at open banking is as a framework that allows individuals and businesses to securely share their financial information between platforms and with third-party providers. Imagine you pay your rent through one financial institution, your car through another and have a credit card through a third. Open banking would allow you to manage all of those accounts through one platform (an app for example) and give other parties secure access to the data you choose to share. It gives financial control back to the consumer.

While Graham suggests open banking puts control back in the hands of the consumer, many others suggest the opposite is true and that open banking will quickly usher in a world that looks frighteningly like China’s social credit system. Take another look at the infographic above, and you’ll see some of those signals in the form of “behavior-driven rewards,” “carbon footprint tracker,” and “public benefit schemes.”

As governments struggle to regulate and businesses grapple to comply, we are still in a moment of volatility that allows for a modicum of privacy protection. But that window is closing fast and it’s just a loophole anyway. Once the loopholes are closed, we doubt there will be any way to opt out of the “open economy.”

So the only way to prepare for this eventuality is to ask yourself the tough questions: Are you willing to forego domestic air travel when biometrics become the norm? Can you do without shopping in stores that ban cash payments? Will your health records be shared with a third party that may make you ineligible for products or services based on behavior, lifestyle, or pre-existing conditions?

As always, beware of any new feature that is being marketed under the guise of ‘free’ or ‘more convenient’ or ‘safer.’ We should all know by now that when the product is free, chances are your data is the commodity.

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