October 2020 Summaries

The Consumer Financial Protection Bureau (CFPB) has released an Advanced Notice of Proposed Rulemaking (ANPR) on Dodd-Frank Section 1033, signaling a significant moment for the fintech industry. This ANPR aims to establish new regulatory requirements for entities covered by Dodd-Frank and seeks input from key stakeholders such as businesses, advocacy groups, consumers, and developers. The rulemaking could strengthen consumer control over their financial data and drive further innovation in fintech. Key takeaways include the importance of consumer control over their data, the blurring lines between financial institutions, fintech companies, and data aggregators, and the potential impact on businesses that rely on customer access to financial information. The CFPB is considering 111 questions about consumer data rights, and responses are due within 90 days.

The Plaid documentation has been revamped to provide a centralized and streamlined resource for developers integrating with Plaid, aiming to facilitate faster development. The new docs feature improved navigation, search functionality, and more in-depth technical answers to commonly asked questions. Resources such as comprehensive error codes, product information, and step-by-step implementation guides are now available in one place, making it easier for developers to go from exploring to launching their products. Interactive content, live demos, and personalization based on what you're building are planned features to further enhance the developer experience.

The UK's payments landscape has undergone significant changes with the introduction of PSD2 and Open Banking, and as such, the government is undertaking a review to ensure its continued development. Plaid, a company that connects 3,000+ apps and services to 11,000+ financial institutions, highlights key limitations and opportunities in the open banking ecosystem, including the need for stronger customer authentication, payment initiation services, supervision and enforcement, and consumer protection. To maximize adoption of open banking services, the government should remove the 90-day re-authentication requirement, grant more supervisory powers to regulatory bodies, and refine the liability model to avoid higher costs for consumers. The UK has a unique opportunity to take the lead globally in financial innovation and Plaid supports the government's objectives for the development of the UK payments network.

Plaid uses a combination of natural language processing (NLP) techniques and machine learning algorithms to parse transaction data from financial institutions, enabling the company to standardize and normalize the data for use across multiple accounts. The process involves named entity recognition (NER), which is used to identify merchants and locations in unstructured text, such as transaction descriptions. Plaid has developed a solution using a masked language model and bidirectional long short-term memory (LSTM) to tackle these challenges. The masked language model uses transformer encoders to encode contextual information of the input sequences, while the bidirectional LSTM model leverages the Bidirectional LSTM framework to understand contextual information both forwards and backwards. The combination of NLP techniques and machine learning algorithms has yielded promising results for location and merchant parsing, with an accuracy rate of 95% as of today.

The Fintech Effect: Consumer impact and a fairer financial system` is a landmark survey conducted by Plaid, which reveals that consumers are experiencing significant benefits from using fintech, including improved financial well-being, increased access to the financial ecosystem, and reduced financial stress. The study found that 82% of consumers report getting better results with fintech, saving time and money, increasing their control over their finances, and reducing financial stress. Consumers also reported a median savings of $360 in bank fees and interest, and almost 4 hours per week in time saved. The survey highlights the growing adoption of fintech during the COVID-19 pandemic and its potential to create a more efficient, accessible, and equitable financial system. As fintech becomes the new normal, companies can incorporate these tools to benefit their customers, with innovation and trust being key to success.

The Liabilities product has been updated to include consumer-permissioned mortgage data, providing developers with access to real-time mortgage information that can be used to enhance the in-app experience and offer more personalized insights and product recommendations. Mortgage debt is a significant category in America, accounting for $15.8 trillion in 2019, and the addition of mortgage data aims to help consumers better manage their monthly cash flow and streamline mortgage payments during uncertain economic times. Developers can now access consumer-permissioned mortgage data via the /liabilities/get endpoint, which allows them to see loan details, payment details, terms, balances, and property addresses for connected accounts. This updated feature is expected to enable fintech innovators to develop cost-saving tools and stand out from competitors by providing comprehensive debt management solutions.

The UK's financial sector is in need of innovation within its pension system. Currently, basic information about costs, charges, and performance can be difficult to find for pension savers. Almost 60% of pension savers don't know their current balance, and 80% leave their pension behind when they switch jobs. The Pensions Dashboard aims to reunite pensioners with lost pensions, but more innovation is needed. Open finance could provide savers with ownership and control over their pension information, leading to better tools for managing their money and ultimately, happier retirements. However, regulators, industry, and providers need to work together to make open pensions a reality.

Plaid has introduced the all-new Plaid Link, a simplified and faster onboarding experience for users to connect their financial accounts with fintech apps. The new feature reduces the number of steps required to connect accounts by skipping the institution select pane for returning users and displaying relevant institutions first based on user location and app usage. Additionally, the design has been improved to be cleaner and more visually appealing, while also ensuring accessibility standards are met. The updated Link aims to make fintech easy, approachable, and accessible to all, with a focus on stable data connectivity and better user experience.

In September 2020, Plaid Exchange introduced instant account activity, allowing institutions to send user-permissioned transaction data to authorized developers within seconds of a user's activity. This feature provides users with an up-to-date view of their finances when using Plaid-powered apps. Additionally, custom sandbox users can now be created and saved in the Dashboard for testing and demos. Updates were also released for iOS SDK (v2.0.1) and Android SDK (v3.0.1), including bug fixes and support for OAuth and Link tokens.