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Venmo Glitch Opens Window on War Between Banks, Fintech Firms

14/12/2019 10:59am

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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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