How to Choose a Secure Financial Data Provider

 In Clients & Partners, Data, Financial Data, Security

Since the mid 2010s, there’s been a lot of talk about how we’ve officially entered the “Age of Analytics.” With the emergence of big data in the past two decades (data sets that are too large and/or complex to be dealt with using traditional methods), data analysis has become more and more important for the long-term success of companies whether they’re big or small, have been around a long time or are brand new. Having access to accurate user data is invaluable for businesses to be able to provide better products and services for their customers and to sustain or build engagement. Without data, a company or app has little hope to survive moving forward. 

As open banking has become more widespread, relevant and timely data has become more readily available for companies. Users are more willing than ever before to share their data – even sensitive data – with third party entities because they believe that it will benefit them. If you’re a financial app or company that needs access to your users’ banking data in particular, you probably outsource that process to a data provider. Yet not all financial data providers are the same. In this article, the fourth article in our data security series (see other posts here, here, and here), we’ll talk about what to consider when choosing a data provider, and how to choose one that will be best for your application.

Option One: Go to the Source(s)

If keeping data secure is a priority for you (and it should be), then your first option to get financial data is to go directly to the sources of the data you want about your users – i.e. the payment networks, banks, financial institutions, credit bureaus, etc. that your users are using. These sources are vaults built to keep their customers’ information as safe as possible. They follow stringent regulations in order to protect data and resources from unauthorized access. Once your users have given their permission for you to access their information from these sources, you have at least some guarantee that it will be kept secure. 

But this option has countless downsides. Let’s say your fintech app initially has 200 users. In order to access their financial data so that your app can do what it was built to do, you would need to go to every single financial institution every single user interacts with in order to get their data, which could easily be 200+ different entities. If you were able to do that, the process itself to integrate with each network or institution takes around six months minimum. Imagine having to do that every time a new user joins your app who uses a different institution. That timeframe is simply impossible to sustain. 

Not only is time an issue with this option; it’s also expensive. You would be paying a hefty new fee for every single institution you integrate with. Again, the idea of paying that fee for every network or bank your users use is practically a death sentence for your app. So even though this option may help keep financial data secure, it’s probably not going to work. 

Option Two: Data Aggregators

A better option is to outsource the transmitting of financial data to a data aggregator, which is a company that compiles and summarizes data from multiple sources so that it can be processed in a meaningful way. With such an emphasis on data, data aggregation is a fast-growing sector in the fintech space today. But like we said before, not all aggregators are the same, and it’s extremely important to do your research before picking one. Just because a company is well-known doesn’t necessarily mean it’s going to be the best option for your app. Here are some security-related questions to ask when choosing a data aggregator company: 

1. What consumer information do they keep?

Data aggregators obviously have access to a LOT of data. And their main job is to transfer that data from one place to another. Yet many aggregators also end up storing some data they’re collecting. You should ask them what kind of data they hold onto and why. 

2. What data do they resell?

Data is valuable, and aggregators know that. Some aggregators take data they access and sell it to other entities in order to increase their profits. You should ask them if they do that, and if they do, what data are they selling? 

3. To whom do they resell data? 

To follow up on number 2, if an aggregator is selling data to unrelated parties, it may be important to know who they are. For example, some of them may sell data to hedge funds or investors who can benefit from the data about users. If an aggregator is doing this, you probably want to know at least something about it. 

4. Are they privately or publicly owned?

There isn’t a right or wrong answer, but how a data aggregator is structured and who owns it can affect how they do their work. For example, a private, small company is most likely more agile and can have a quicker response to requested changes than a large, public company. On the other hand, however, larger long-established companies may be more financially stable than younger companies. Again, there’s no right answer here, but you’ll want to at least consider these things when choosing your data provider so that you know what to expect. 

5. Are they financially stable?

Obviously you want to partner with an aggregator that’s financially stable, so that you can hopefully work with them for the long run. If you choose a public company, you can access public records and reports that annually detail their financial information. For a private company you can look at their valuation or also the money that they’ve raised through funding rounds and make conclusions based on that. 

6. Do they use the approved standards?

As we’ve discussed in previous articles, there are specific security standards that companies should follow in order to keep their information secure. Aggregators can earn security certifications based on the standards they follow, and those certifications are usually readily known to the public. Take the time to look into what certifications they have, and also if they’ve had any issues with hacking or data breaches in the past. 

7. How reliable are their systems?

It may be worth it to reach out to a data aggregator’s other customers to ask about their experience working with the company. Have they run into issues? How quickly does the company respond if they need help or something updated? Other people’s experiences can be helpful for you to anticipate what it would be like to work with a specific company.

Option Three: Pentadata

In 2022, we know you have a lot of options to choose from for financial data providers. But Pentadata is a unique option for you to consider partnering with. First of all, we are as secure as possible. We regularly undergo rigorous testing and follow strict compliance guidelines in how we access and port financial data. We’re SOC2-Type 2 compliant, which is the highest level of security available to date. 

Second, we’re connected with over 6,000 financial institutions (including the 10 major North American banks as well as the other data aggregators) through our partnerships. Pentadata offers the widest coverage possible in today’s market, which means you’ll have access to essentially all institutions your users could possibly be using just through us. 

Third, when you choose to work with us, we can get you up and running from start to finish in about a week. Compare that to the six plus months required with option one, and it’s a no-brainer. It’s not a very complicated process for you to implement since we do all the work on our end. It’s fast and easy. 

Lastly, the data you get through Pentadata is truly the most reliable out there. Because we’re constantly getting real-time data from such a broad network of institutions and companies, what you get from us will always be up-to-date and accurate, which is essential for the work your app does. 

Choosing the right financial data provider is crucial for the long-term success of your application. If you want to talk more about how accessing financial data through Pentadata will benefit you, check out our website and contact us with your questions today!

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