Why Secondary Use Cases Matter for Consumer Financial Health

As the Consumer Financial Protection Bureau nears the publication of its final rule under Section 1033 of the Dodd-Frank Act, industry players and Congress members continue to weigh in on key points within the proposed rule. Recently, a bipartisan group of 14 members of Congress published a letter urging the CFPB to revise secondary data use restrictions.

Specifically, the letter calls out concerns related to the “significant restrictions on the secondary use of data” that “could discourage the advancement of innovations that benefit consumers and small businesses by curbing basic product improvements and the development of tools to fight fraud.”

At MX, we believe enabling secondary use cases in a way that balances consumer benefits with privacy and security is critical. While we agree it’s important to safeguard how consumer data is collected, stored, and used by financial services providers and data intermediaries, restricting beneficial secondary use cases could inadvertently harm consumers, stifle innovation, and create a larger competitive gap between large institutions with access to broader sets of data and smaller institutions. 

Here’s our take on the key points made in the letter from Congress members and our point of view on the value of secondary use cases that benefit the consumer: 

Fraud Protection

“Restrictions on use of data for product improvements, as drafted, could limit the use of data to improve existing anti-fraud tools or develop new ones.”

In today’s vast digital financial landscape, fraud remains prevalent. Financial services providers should continue to evolve and learn from consumer data to prevent malicious attacks that will hurt consumers. Secondary use case restrictions may limit providers’ abilities to effectively target fraud attempts.

Ongoing Product Improvements and Helping Low-Income Consumers

“The proposed rule… would prohibit some companies from leveraging data to improve a product or from using data to develop other innovative products.”

The use of consumer data allows financial service providers to better understand and address pressing consumer needs. Insights derived from consumer-permissioned financial data can help inform product updates and improvements to further benefit the consumers, and provide them with additional value. 

For instance, cash-flow underwriting is an example of a financial service offering that benefits low-income consumers by improving access to consumer credit — particularly for those “50 million Americans deemed unscorable or credit-invisible”. The proposed rule could prohibit lenders from using consumer-permissioned data to design and improve their underwriting models.  

Data Enhancement

Data enhancement services, like those provided by MX, enable increased visibility, clarity, and transparency into a consumer's financial history. For example, our research has shown that nearly 1 in 4 consumers see transactions on their account that they don’t recognize at first glance at least sometimes or more frequently. Indecipherable raw transaction data that comes across as a string of characters with no context can lead to frustration, confusion, and even false reports of fraud for consumers. Data enhancement services help bring clarity and deliver transaction data in simple, human-readable descriptions, making it easy for consumers to identify, organize, and act on financial data.

Broadening Access and Awareness of Financial Products

Consumer-permissioned data should only be used to further the consumer experience. Data providers that identify beneficial products for their customers through a combination of their own data about the customer and data obtained from third parties (with the consumers’ permission) should be permitted to market products to their own customers based on a complete understanding of the customer’s financial well-being. 

Conclusion

According to the letter from Congress members, the “Personal Financial Data Rights rule will be most powerful if consumers enjoy a competitive marketplace where providers compete fiercely to meet their needs, not one that empowers incumbent players.”

Data-driven insights enable not only consumers to thrive but also competition and innovation. We look forward to seeing how the final rule from the CFPB takes shape based on ongoing collaboration and inputs from the industry and broader ecosystem. Want to dive deeper into why secondary use cases matter? Read our full point of view.