A consumer watchdog is warning advisors and consumers about fintech applications due to data-sharing and privacy concerns.

The chief problem, said Linda Sherry, director of national priorities for Consumer Action, is that many fintech apps are designed to integrate directly with banks and investment accounts by storing and using a consumer’s passwords.

“We often don’t know the first thing about these companies,” Sherry said. “We don’t have any way to follow after we’ve linked our accounts and check back to make sure we’re connected securely, so it becomes an issue.”

Sherry is calling for tighter regulation on fintechs and a federally mandated right-to-data privacy for consumers. “Most people are so busy, we shouldn’t be putting these burdens on them," she said. "The vetting we should logically do just falls by the wayside, and that allows a bad actor to sneak in quickly and gain access to our data.”

Many fintechs still use an obsolete technique called “screen scraping” that collects data that shows on digital display—literally reading off of what a user would see on their screen—to aggregate a user’s financial information, Sherry said.

More secure, modern fintechs connect directly with a user’s financial services provider using technology like tokening and application programming interfaces to share data safely and directly.

Advisors and financial firms need to be cautious about referring clients to different fintech applications to help manage their finances, Sherry said.

“Most of these companies disavow any kind of liability in their fine print, not that consumers read it,” she said. “Many consumers assume that if there’s fraud or a breach, the financial services company will make good on it. There’s definitely a danger in saying 'go use this app' when in fact the data practices may not be robust in those places.”

Even companies that use modern tokening technology to create a digital “handshake” between an app and a financial data provider are disavowing liability for breaches, Sherry said.

This is a cause for concern because even the largest financial companies, like Equifax, are vulnerable to hackers.

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