Big Fintechs Are Holding Community Banks “to ransom” Over Customer Data, Warns Fintech CEO

The fintech sector’s outrage at plans to ditch open banking rules is “totally hypocritical,” says Adam Turmakhan, CEO of TurmaFinTech, who argues providers have been holding US community banks “to ransom” over their customer data for years.

Turmakhan’s intervention follows reports that the CFPB will propose a new version of open banking rules following the fintech sector’s fury at plans to scrap them altogether.

For Turmakhan – who heads up TurmaFinTech, a startup helping US community banks and credit unions analyze and monetize their customer data – this issue has been flying under the radar for years. He argues fintech providers are among the “worst offenders” in abusing open banking and, in doing so, the community banking sector.

Turmakhan has seen firsthand how fintechs – large and small – have built systems that lock other providers out, cut banks off from their own data, and force them to rely on pricey third-party contracts. Their controlling approach is preventing the 90% of community banks that want to digitalize from leveraging data on their own terms and building tailored tech stacks.

Community banks are already facing a growing technology lag, with members of the ‘Big Four’ pouring upwards of $15 billion into their tech budgets each year. For Turmakhan, it’s high time the fintech sector was exposed for its malpractice, or it could stamp out community banks’ hopes of digitalization “once and for all.”

Adam Turmakhan, CEO at TurmaFinTech, said: “Big fintechs were the first to cry foul following reports that open banking rules would be scrapped. They were incensed that the biggest banks could shut them off from accessing customer data, but honestly, I find that totally hypocritical. For years, fintech firms have been some of the worst offenders in abusing open banking.

“They’ve held community banks to ransom, controlling their customer data, embedding themselves in their systems, and building platforms that lock other providers, and the banks themselves, out. They have made it near-impossible for community banks to take control of their digitalization and at a time when these smaller institutions are struggling to compete, they have seriously threatened their success.

“Don’t get me wrong, fintech providers have the potential to bring genuine value to smaller banks when they work with them hand in hand. But firms that call all the shots and strip away community banks’ data autonomy are doing far more harm than good. 

“Empowering small banks to embrace technology on their own terms is the only way we can close the sector’s tech gap. If fintech firms aren’t checked, their malpractice could bring a halt to community banks’ digitalization once and for all.”