Surviving Data Democratization: What Government Regulations Will Be Imposed?


We are in the middle of a digital revolution. So much information is being accessed via digital platforms that it has literally changed the way we live and how we do business. More specifically, the digital revolution has changed the way we bank.

When it comes to the banking realm, consumers have developed a dependency on accessing their banking information and conducting their financial business via their smartphones and tablets. Meeting this need is the FinTech boom, which has stepped in to fill this void and has expanded consistently as the need continues to grow.

But with so much free-flow of digital data comes questions about who should retain and who should be free to directly access it, which is where the concept of data democratization comes into the picture. With so much big data available to process and new digital technology to help make accessing it easier, the demand for the democratization of data grows.

The question is, how will the government step in to regulate it?

Government Regulations to Oversee Data Democratization

Data is growing faster than ever before and as the volume increases issues related to data collection and access to the data are primary concerns. Government regulations are needed to manage the way data is to be shared among consumers and businesses, especially given the rise and explosion of the FinTech revolution. Lawmakers cannot help but notice and acknowledge consumers' increasing desire and dependence on direct access to their financial data through digital platforms.

FinTech firms continue to transform the lending sector in several ways, including how profits are generated, the manner in which consumers and lenders interact, and the underwriting and the loan assessment processes.

Consumers expect to access their own financial information. As such, the government has expressed concerns about how U.S. financial institutions have long been limiting direct consumer access to data.

Some financial institutions provide their consumers with a simple and efficient means of sharing their data, while others place limits on data access which can lead to inadequate consumer participation and poor financial wellness. Some banks may even choose not to let consumers access their information at all.

Policy makers have noticed such inconsistencies, and have addressed it. In 2016, the Consumer Financial Protection Bureau (CFPB) took measures to assess the restrictions that U.S. financial institutions place on the data that consumers are able to directly access. The best way for consumers to improve their personal finances is to be able to easily access their own financial data and obtain direct financial advice, and the CFPB has acknowledged that.

CFPB Director Richard Cordray believes that consumers should have the freedom and flexibility to have direct access to their financial data and be able to share it with their lenders and others safely across digital platforms. In an effort to make this happen, a public inquiry was launched by the CFPB. The power that consumers have in accessing their banking information and the level of security that comes with it continues to be assessed.

Government Regulations and Their Effect on Consumers

Regulators need to make sure that individual user control of data is upheld, and that structural changes in the marketplace are made. This will help to foster more accountability to consumers. Government regulations should also implement public interest regulation of larger big data platforms to make sure they're held accountable, especially in the financial services sector.


Data democratization is currently supported by federal legislation with the likes of Section 1033 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. This particular section details the control that consumers are to have regarding access to all the technologically-backed tools available to do their banking and access lending products. The focus is on making it easier for consumers to boost their financials.

When consumers are free to access their financial data using the tools and service providers that they choose to work with, they're given more flexibility and liberty in the marketplace.

The Impact on Lenders

Data democratization comes with stipulations for all stakeholders in today's financial services system, all of which include supporting and protecting consumers and their financial information. In addition to giving more secure access to financial data to the American consumer, a bill of data rights can help establish clearly defined roles and responsibilities of all players that have a hand in the market. This includes FinTech providers and banks that provide technological platforms for consumer data access.

Financial institutions and FinTechs are encouraged to securely share their customers' information upon their request and ensure that the right precautions are taken with all new innovations.

Of course, an increase in the vigilance of the financial industry through heightened regulations can have a heavy impact on lenders. For example, following the financial crisis of 2008, the banking sector became subject to several new regulations established by legislation.

Because of the time and effort required to adapt business practices to ensure adherence to new regulations, increased regulation usually results in a heavier workload for financial services.

That said, government regulations can also be beneficial to the financial industry over the long run.

Managing Loan Portfolios in the Wake of Heightened Government Regulations

Data democratization has its positive aspects for both consumers and the financial institutions that service them, so it is not surprising that government regulations would be put in place to regulate it.

In the wake of a strengthened regulatory environment, lenders and loan buyers would be well advised to team up with an asset management company to help optimize their loan portfolios by making appropriate loan sale and acquisition decisions. Maintaining a healthy and strong loan portfolio can help hedge against risk and ensure increased regulatory compliance that the industry will continue to contend with.