Warning! Data Aggregators!

By G. Kevin Mathis, Fall 2018 IAC Student Intern

Warning! Warning! Warning! Warning! Warning…

Thankfully, Kevin Malone alerted his friends and fellow Office co-workers about a matter of concern, their boss entering the room.  Kevin knew his co-workers could clearly see their boss, Robert California, but he was still concerned that his co-workers would be caught unawares.  Had he not issued his warning his co-workers would probably have been caught snooping through their boss’s notes.

Kevin Mathis wants to issue a warning to investors.  My warning concerns an alert about data aggregators that FINRA issued. Perhaps investors are aware of the issues associated with data aggregators.  But, as we learned from Kevin Malone, an additional warning helps.  Warning! in the context of data protection, data aggregators can cause problems for investors.  

Merriam-Webster defines an aggregator as websites or software that aggregates or gathers information from various other sources.  According to FINRA, financial data aggregators gather personal consumer financial information through either scraping or financial APIs.  Typically, financial data aggregation gathers all of an investors information about their financial holdings on a single dashboard, personal financial management hub, or portal.  That hub allows investors to display and view all of their investments, savings, insurance policies, and credit balances.  With some hubs, investors can even import and export data relevant to taxes, mortgages, budgeting, and credit.  Giving investors a portable single service hub with which they can conveniently and efficiently manage their banking and finances.

According to FINRA’s alert, the convenience and efficiency created by gathering investment data at a single service hub also create the risks associated with data aggregation.  Investors must agree to provide the aggregator with their login information for their financial accounts.  Sharing their security credentials means investors expose themselves to privacy and security risks.  Investors are potentially vulnerable to cyber fraud, unauthorized transactions, and identity theft.  Concentrating all their security credentials at a single hub means should that hub be compromised the investor risks compromising all of their personal consumer financial information.  Even more worrisome is that many data aggregators operate under limited regulatory oversight.  In areas of data privacy and security, most data aggregators are not even subject to the same regulation as the financial institutions that are sharing data with the data aggregator.  Lastly, if the data aggregator sells their own investment products or your data to affiliates that do sell investment products you may receive solicitations from investment entities.

Investors should consider the positives and negatives when using a data aggregator because unlike Robert California most of us cannot afford to leave our personal information where some unwanted individual or company can access it.  So, before you use an application to aggregate your personal information and financial data be mindful of the value and risks associated with data aggregation.

FINRA offers a list of suggestions to follow when sharing personal information and financial data.

For more information follow this link to read FINRA’s Data Aggregation Risks Investor Alert.