By Lydia Beyoud
Banks aren’t the only financial account holders fintech companies are struggling to get consumer data from. Government contractors such as the one running the nation’s low-income food assistance program are also proving reticent to open up their data, even at consumers’ request.
Rep. Gregory Meeks (D-N.Y.), a member of the House Financial Services Committee, is pressing the Department of Agriculture to clarify that the contractor administering the Supplemental Nutrition Assistance Program (SNAP) share recipients’ account data with third parties, according to a May 15 letter.
“Millions of SNAP recipients today are using emerging mobile platforms to better manage their SNAP benefits and do a lot more: save money on groceries, find jobs, and build their careers,” Meeks said.
The letter comes in response to a New York Times story on one of the USDA’s SNAP servicers, Conduent, which runs the food stamp network in 25 states, including New York, and Propel, a Brooklyn-based startup that launched an app to help assistance recipients more easily track their food budget and account funds delivered via electronic benefit transfer (EBT). Currently, recipients typically have to dial a hotline or log on to a desktop site to check their SNAP balance.
Conduent’s spokesman Sean Collins told Bloomberg Law by email that it viewed Propel as having “discreetly launched FreshEBT, an unregulated app, without the input, knowledge and consent of our clients/states and enticed SNAP recipients to provide highly confidential, personal information, enabling Propel to enter the otherwise secure environment and screen scrape data about the recipient and his/her purchases.” Collins added that Conduent views screen scraping as an insecure data collection method “when performed in an uncollaborative environment,” and Propel’s scraping actions pose security risks.
“Our clients — the states — demand that Conduent process SNAP transactions on a high-performing and secure platform that prevents service disruption, protects our clients’ information and manages any interference in service operations. All actions we have taken therefore are at the behest of our clients – the states,” Collins said.
Propel’s CEO Jimmy Chen told Bloomberg Law that Conduent’s response was “just another example of a big government contractor resisting change.”
“In this case, all it does is hurt low-income Americans and the government agencies trying to serve them,” he said by email.
Propel’s app anonymizes user data and doesn’t store personally identifiable information or sell user data, according to a company blog post. Chen added that the app only scrapes Conduent’s and other SNAP administrators’ sites when consumers are actively using the app.
Chen said Propel has a good working relationship with another of the largest SNAP benefits administrator, FIS, as well as Solutran, a smaller player. “We haven’t had any problems with the other two EBT contractors. They’ve worked with us and everything has been smooth. We believe we should all share the same goal: we all want the SNAP program to function efficiently so low-income families can put food on the table,” Chen said.
Control of consumers’ financial data is a major point of contention in the fintech policy space. Banks are often hesitant to share data with fintech companies and other third parties, citing security concerns. Some fintech companies say that reason is a misdirection and that financial institutions don’t want to give up control over lucrative and detailed consumer financial data.
More recently, financial institutions and fintechs have been seeking to resolve the issue by establishing secure interfaces to share data, with consumer consent. Those moves came after the Consumer Financial Protection Bureau responded to the friction between the two industries and proposed principles for data sharing in 2017.
“FinTech often needs access to data and existing platforms to be able to deliver on some of its promise to empower people to better control their financial lives,” Aaron Klein, policy director for the Center on Regulation and Markets at the Brookings Institution, a nonpartisan Washington think tank, told Bloomberg Law by email.
“Congressman Meeks is right to flag this issue and to push providers of federal services, such as SNAP, to provide this data to third parties who can help empower families,” Klein said. “The goal of the program is to help families not make contractors rich again,” he added.
But the tug-of-war over who controls consumer data in the realm of government programs puts assistance recipients at a disadvantage, Meeks said. The pool of consumers who could potentially benefit from easier access to their SNAP financial accounts is large: approximately 42.2 million people were enrolled SNAP in 2017, according to USDA statistics.
At the same time, smartphone use has high penetration among low-income Americans, at nearly 70 percent, the letter said.
Makada Henry-Nickie, another Brookings scholar and specialist in policy issues related to prosperity, race and social inclusion, said she supported the entrance of fintech companies into the area of SNAP benefits, in order to serve “a long-overlooked segment of the market--the bottom 20% of the income distribution.”
“Their admission could pave the way for positive, innovative disruptions and improve the lives of disadvantaged families,” Henry-Nickie said by email.
However, she cautioned that allowing data aggregators to access and mine transaction histories can also pose problems. “Congressman Meeks points out that the CFPB outlined principles for data sharing and aggregation. Principles are not equivalent to strong regulatory guidance; and are a long shot from protecting beneficiary data,” she said.
Low-income Americans who have the resources to better manage their finances shouldn’t be prevented from doing so, Meeks said. “Fair access to financial services, and the benefits of innovation, should not be exclusive to those who can afford them,” he said.
The USDA confirmed June 16 it had received Meeks’s letter “and will work through our Congressional offices to respond to the Congressman’s concerns directly,” a spokesperson said by email.
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