Venmo Glitch Opens Window on War Between Banks, Fintech Firms
December 14 2019 - 5:59AM
Dow Jones News
By Yuka Hayashi
PNC customers are getting a front-row seat on the rivalry
between the banking industry and financial technology
companies.
Many of the Pittsburgh bank's clients are having trouble
connecting their accounts to their Venmo apps, cutting off access
to PayPal Holdings Inc.'s popular mobile payment service. When they
have sought help, they have found the two companies blaming each
other for the disruption.
PNC Financial Services Group suggested in tweets that customers
switch to Zelle, a rival payment app that it and other big banks
jointly operate.
Venmo countered by urging its users to tweet their complaints,
suggesting they tweet: "Hey @PNCBank...Let me use the financial
service apps I need!"
The skirmish is part of a war over access to customer financial
data. Fintech companies -- nonbank firms that use apps and other
new technologies to provide financial services such as digital
payments, loans and financial planning -- say they need access to
customers' account information held by banks and other traditional
financial companies. To protect their own turf, banks and brokerage
firms have resisted.
At the center of the PNC-Venmo dispute is Plaid, a data
aggregator that connects Venmo and thousands of other apps to
financial institutions. When PNC upgraded its security systems, it
prevented Plaid from accessing the sort of customer information --
including account and routing numbers -- it uses to facilitate
online transactions.
Greg Curran, a PNC customer and the owner of an entertainment
company near Philadelphia, said it took him five calls and several
messages over two weeks to restore his Venmo service after it was
abruptly disconnected from his bank account last month.
"It's like the left hand doesn't talk to the right hand," said
Mr. Curran, who frequently uses Venmo to receive payments from
customers. "It was kind of a schoolyard fight between
billion-dollar companies."
Banks cite security concerns for their moves to limit fintech
firms' access to their customer data. PNC began blocking data
aggregators such as Plaid from access to customers' accounts and
routing numbers after identifying "multiple different aggregators"
attempting to circumvent the bank's security protocol, bank
executives say.
"When aggregators access account numbers, many store them
indefinitely, often unbeknownst to customers. This puts customers
and their money at risk," said Karen Larrimer, PNC's head of retail
banking and chief customer officer. "We want to make sure we know
who is setting up the account."
Plaid says it had already worked with PNC to provide requested
system updates. "Protecting consumers needs to be a joint priority,
and we work with thousands of other banks to make sure their
customers are never in this situation," said John Pitts, Plaid's
head of policy and advocacy.
PayPal spokesman Justin Higgs said, "We also believe that
customer choice and the ability to seamlessly use Venmo services is
an important part of the daily lives of people around the country."
He added that Venmo shares a dedication to user security.
Fintech firms and banks have tried to find mutual ground for
data sharing. Together, they formed a group called the Financial
Data Exchange, which is working to promote the shift to a
technology to replace a method known as screen scraping, used by
many apps to access customers' accounts by using their usernames
and passwords.
Just last month, the Clearing House, a bank trade association,
issued a model agreement to help banks and fintechs sign individual
data access agreements.
But industry experts say online lenders sometimes face
difficulty gaining access to customers' bank account information
needed to underwrite loans. Budgeting apps like Mint, run by Intuit
Inc., have received complaints from users about having to renew
links to financial firms repeatedly.
"It speaks to where banks are, specifically in the U.S., where
customer data is largely still seen as proprietary to the banks,"
said Stephen Greer, a banking analyst at Celent, a consulting firm.
He expects the U.S. to eventually follow the European Union and
other nations in shifting to the philosophy that "customer data is
really customers'.'"
PNC executives said customers can still use Venmo by manually
putting in their account information to bypass Plaid, a step that
usually takes one to two days. The bank says it has asked Plaid and
other aggregators to make changes to their own systems to meet its
security requirements.
Ms. Larrimer said PNC hasn't noticed "any significant amount of
customers" affected by its dispute with Venmo. Two people familiar
with the situation say nearly 200,000 PNC customers are potentially
inconvenienced by the problem.
Write to Yuka Hayashi at yuka.hayashi@wsj.com
(END) Dow Jones Newswires
December 14, 2019 05:44 ET (10:44 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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