Channeling the power of identity data
Recent innovation in financial services has allowed consumers to share their data in the platforms of their choice. These data run the gamut from historical transactions, to payments info, to income data, and tax info.
But while ecosystem participants generally agree on the usefulness of those data types, identity info remains controversial. Some financial institutions have even questioned whether consumers should be allowed to share this info outside their bank.
That’s why we’re excited to announce the publication of our primer on the topic, “The Power of Identity Data”. The primer explains how all participants in financial services benefit by enabling secure sharing of identity data with a consumer’s permission.
These questions are understandable: Identity — which we think about at Plaid as name, email, address, and phone number associated with a consumer’s bank account — is a sensitive set of data fields.
Yet leading organizations, including fintech companies and traditional institutions alike, are already safely harnessing identity data to make the financial services ecosystem more secure. In fact, identity data is a critical input to preventing improper access to financial services — not unlike how a passport is a key input to screen airport passengers.
Importantly, solutions to prevent improper access almost never rely on a consumer’s bank-hosted identity data alone to verify identity. Instead, they combine this info with data from other sources, like info that a consumer provides directly or info from third-party databases. This puzzle-piece approach—especially when enabled by trusted intermediaries—can make all parties in the ecosystem more secure—and is already widely practiced in traditional payment flows like wire transfers and checks.
We think thoughtful identity data sharing offers a rare “win-win-win”: improving financial ecosystem security, reducing operational costs for banks, and enabling innovation for consumers, and we hope this primer can help illustrate why.