Facebook has reportedly approached several large US banks, asking them to share detailed financial data about their customers, including bank balances and card transactions.
In an effort to boost user engagement, the social media and technology giant is said to have pitched ideas to leading US banks, including potentially showing users their bank balances and fraud alerts within Facebook.
According to The Wall Street Journal’s sources, Facebook has engaged JPMorgan Chase, Wells Fargo, Citigroup and US Bancorp over the past year to discuss the product offerings it could provide their banking customers on Facebook Messenger.
Unsurprisingly, the proposals have raised data privacy concerns – particularly as they have become overshadowed by the Cambridge Analytica data mining scandal, which saw millions of Facebook users have their data accessed without permission. One large US bank is said to have shied away from talks with Facebook due to such concerns.
What would Facebook do with financial data?
The social media platform has long since moved on from simply being a platform for connecting with friends and family and, with its marketplace and other ventures, is positioning itself as a place to buy and sell too.
A source told the WSJ that Facebook had discussed with several banks the idea that customer financial information could be used to offer services that would encourage users to spend more time on its Messenger service. Since Facebook reported slowing growth last month it has redoubled its efforts to boost engagement.
The company said it wouldn’t share financial data with third parties or use it for ad-targeting:
“We don’t use purchase data from banks or credit card companies for ads,” said spokeswoman Elisabeth Diana. “We also don’t have special relationships, partnerships, or contracts with banks or credit-card companies to use their customers’ purchase data for ads.
Like many online companies, we routinely talk to financial institutions about how we can improve people’s commerce experiences, like enabling better customer service. An essential part of these efforts is keeping people’s information safe and secure.
The proposed deals have reportedly seen Facebook approach banks for information on where its users are utilising their debit and credit cards outside of Facebook Messenger.
Facebook aren’t alone in showing interest in the valuable data held by financial institutions. The WSJ reports that its sources say both Google and Amazon have asked banks to join them in data sharing agreements, thereby enabling their Google Assistant and Alexa smart products to offer banking services.
Internet of Business says
While it’s likely that many large online technology companies would like greater insight into their customers’ financial data, and, in some cases, may be actively pursuing it, Banks and other financial institutions have historically been reluctant to share customer financial data with third parties.
Even without the increasing scrutiny placed on Facebook in the wake of Cambridge Analytica, financial data is amongst the most closely guarded personal information, both in terms of regulatory constraints and user willingness to share.
Facebook’s data reach extends beyond what many users are aware of. Only recently has it offered clearer guidance on the information it has access to, such as users’ browsing history outside its own website, and provided more information on how users can adjust these privacy settings.
While many people may shy away from giving Facebook greater insight into their lives, a number of its users seem comfortable utilising Messenger’s ability to send money through PayPal, added last year. Mastercard customers can also place online orders with some retailers via the platform.
The advent of Open Banking and PSD2 in Europe has seen older, larger banks having to compete harder for customers’ business, and smaller and newer banks more able to grow and access the market.
Customers now have greater control over their own financial information, allowing them to share data across regulated providers and applications, gain new insights, and better manage their finances.
It has also created an environment in which challenger banks and start-ups, such as Starling and Monzo, can flourish, supporting the new opportunities presented by PSD2, while many banking stalwarts struggled to become compliant due to their reliance on legacy systems.
Though the like of Amazon, Google and Facebook have, so far, operated on the fringes of the space, it’s only a matter of time before they start making more overt ventures into financial products.
Analysts at Goldman Sachs have previously argued that Amazon’s base of over 100 million Prime customers, and its vast amount of shopping data, puts the company in a unique position to become a major player in the finance space. However, it will likely shy away from standalone banking operations, favouring instead financial products that compliment and feed its retail operations.
The lack of financial regulatory constraints on tech companies in the US is raising concerns about their entry into financial services. In May, Bloomberg reported that the Federal Reserve is monitoring the potential for disruption from the likes of Amazon and others.
The interest in financial products by big tech companies is certainly a factor in the hesitancy felt by US banks in the face of rumoured proposals from Facebook and others. They’re unlikely to want companies with such financial, technological and data might to impose themselves on their turf, particularly given their large user bases and existing e-commerce presence.
It’s also important not to underestimate the importance of trust in the sector. The established, historical banking institutions know the value of trustworthiness, when it comes to acquiring and retaining customers.