Sunday , July 12, 2020

The Clearing House Payments Co. And 11 Banks Take Stakes in an Access-Protection Firm

FMR LLC, the parent company of Fidelity Investments, the big mutual-fund and asset-management firm, this week spun off Akoya LLC, a tech company that recently launched an account-access protection network. Akoya is now co-owned by FMR, The Clearing House Payments Co., and 11 of TCH’s member banks, a development expected to greatly widen the use of Akoya’s technology.

The strategy behind the acquisition is to have Akoya stand at the door when customers want to link their accounts to third-party applications from fintechs, as well as data aggregators. Third-party financial apps are booming as personal-financial management programs, online banks, other fintechs, and data aggregators seek access to raw banking data to carry out their functions. Under the usual practice, consumers simply give their login credentials to third-party apps. 

But with Akoya, which has created an application programming interface-based (API) network, acting as the go-between for its user banks, third parties will not have direct access to credentials.

“This removes that from the process,” a spokesperson for New York City-based TCH tells Digital Transactions News. “That’s a huge concern for the financial institutions.”

Data recipients will still be able to get what they need assuming they have customers’ permission. With Akoya’s technology, however, banks can limit access to only the customer account with the relevant data, not other accounts the customer may have with the institution. So-called scraping through such broad access is possible under the old model if the third party has access credentials, according to the TCH spokesperson. 

“Consumers’ personal financial data should only be accessed with their explicit consent, and they should have the ability to monitor and revoke that access,” Abigail P. Johnson, chairman and chief executive of Fidelity Investments, said in a news release. “For this reason, we created Akoya and are now joining with several financial institutions to accelerate the availability of a secure, transparent, and more reliable network for the entire financial-services industry.”

The TCH spokesperson says the federal Consumer Financial Protection Bureau in 2017 identified the potential for fraud and data breaches as a result of current data-sharing practices. And the Vice news service last week reported that supposedly anonymous bank and credit card data sold by data aggregator Yodlee could be unmasked to reveal consumer identities. In a statement to Vice, Yodlee and its parent company Envestnet Inc. said they follow industry practices as well as government regulations and laws in protecting data.

TCH is a bank-owned processor that operates one of the nation’s two automated clearing house switches as well as its Real Time Payments network. Besides TCH and FMR, the other co-owners of Akoya are now Bank of America, Capital One, Citi, Huntington Bank, JPMorgan Chase, KeyBank, PNC Bank, TD Bank, Truist (the name of the entity created by the merger of BB&T and SunTrust), U.S. Bank, and Wells Fargo. 

Akoya’s platform only went live late in 2019. The TCH spokesperson said the processor’s bank owners have been interested in developing a system similar to Akoya’s, but then they heard about FMR’s Akoya project, leading to the newly announced spinoff. Akoya is expected to offer access to its services to non-owner banks as well, according to the spokesperson.

The release says Akoya’s API is based on the Financial Data Exchange (FDX) standard from FDX, a non-profit whose members include banks, payment processors, and fintechs, including data-access provider Plaid Inc., which Visa Inc. plans to buy for $5.3 billion.

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