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In November’s roundup of top tech news, read on to learn more about President-elect Donald Trump’s impact on fintech funding, how VyStar Credit Union’s digital banking upgrade drew the ire of the Consumer Financial Protection Bureau, the future of artificial intelligence and more.
Buying a home has never been harder. Some fintechs say they can help
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Home affordability is at a near 50-year low for Americans, according to theÂ
Foyer is a startup in New York that offers a savings plan for first-time homebuyers. It’s one of several fintechs trying to help struggling consumers buy their first home. Another, Divvy Homes, offers a rent-to-own model — people rent a home owned by Divvy, and a portion of each month’s rent goes toward a down payment on a mortgage. Esusu reports rent payments to credit bureaus to help renters establish credit. Tomo Mortgage says its mortgages have lower fees and interest rates than traditional banks.
Not to be outdone, some banks and mortgage providers are also trying to give first-time homebuyers a break. Southern Bancorp, a Community Development Financial Institution based in Arkadelphia, Arkansas, is launching an initiative to make $500 million worth of mortgages to low- and moderate-income borrowers in rural and minority communities, CEO Darrin Williams said in anÂ
Lawsuit: Lendistry, Plaid and Qualified violated consumer data rights
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A Los Angeles accounting firm has sued online lender Lendistry, saying the company violated several California laws, including data privacy laws, in its administration of a state-funded grant program for California businesses. The lawsuit alleges Lendistry collected and shared grant applicants’ sensitive personal and financial information without their knowledge or consent. Many of the data privacy violations involve Lendistry’s tech partners, Plaid and Qualified, though they are not named as defendants.Â
The complaint is sweeping and it accuses Lendistry of failing to protect customer data in the course of several practices common to lenders, including the use of data aggregators to gather bank account data; the use of AI to analyze chatbot conversations, call center conversations and bank account data; and the use of tracking cookies. The suit comes shortly after the Consumer Financial Protection Bureau finalized its Personal Financial Data Rights rule, sometimes called the open banking rule, which puts restrictions around such data sharing.
Trump win unlikely to stop the crackdown on BaaS and fintech
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The years-long regulatory clampdown on relationships between banks and fintechs picked up after the collapse of banking-as-a-service middleman Synapse, and it’s unlikely to let up, even with a new president taking over in January, leaders in BaaS and fintech say.
“I don’t anticipate immediate change as it will take some time for the reshuffle of personnel at the leadership level to take place,” said one BaaS banker who did not want to be named for fear of retribution from regulators. “Consequently, we may have a short-term quiet period on enforcement actions. Everything moves slowly in actual practice and enforcement.”
Jason Henrichs, CEO of bank consortium Alloy Labs Alliance, agreed that the impact of the new administration on BaaS will be limited.Â
Elder fraud is rising. So is the pressure on banks to catch it
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When Janine Williamson’s uncle Larry Cook, a retired Navy commander living in Herndon, Virginia, died, she was appointed administrator to his estate and began receiving his mail. Williamson, a financial planner, saw some unusual activity in his monthly statements from Navy Federal Credit Union.Â
She asked the credit union for 12 months’ worth of statements and soon realized that 74 wire transfers of exactly $49,500 each had been sent to individuals in Thailand over the course of six months. (As it turns out, that is just shy of the amount that triggers a government transaction reporting requirement in Thailand.) She subpoenaed Navy Federal for the cover sheets for the wires and saw they all went to different addresses.
“One of the addresses was ‘165 alley behind the old Phraya Karai Temple Wat,'” Williamson said in an interview. A bank employee had dutifully written in that address and allowed the wire to be sent, as with the 73 others, she said. All told, Cook’s estate was drained of $3.6 million.Â
What Trump presidency will mean for banks’ AI projects
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When the Trump administration takes control in January, many observers expect the Biden administration’s executive order on AI, which imposed some standards and protections around the development and use of the technology, will be dismantled. What that order will be replaced with is uncertain and to some extent subject to the whims of influential advisors like Elon Musk and Peter Thiel.
The Trump-led government is bound to be pro-business and anti-regulation, as it was the last time.
“I assume the policy will focus on American businesses and workers to maintain global competitiveness in AI development,” said Ryan Hildebrand, chief innovation officer at Bankwell, a Connecticut community bank based in New Canaan with just over $3 billion of assets. “It will aim to protect American jobs and intellectual property, possibly through restrictions on foreign AI companies and favoritism for U.S.-based developers.”
‘Like qualitative research without having to pay’: A bank’s guide to Reddit
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Michael Nagle/Bloomberg
Reddit teems with digital communities of anonymous users who are eager to debate politics, recommend recipes and swap pictures of baby corgis. Within these conversational forums known as subreddits — which exceed 100,000 — is what some people think is a resource underutilized by banks: users passionate about topics relevant to financial services.
“Personal finance” is the 37th largest subreddit on the Reddit network with 20 million members. The r/CreditCards subreddit has 1.4 million members and is in the top 1%. A subreddit devoted to theÂ
Access to anonymous reviews of financial products is not unique to Reddit, “except in the extent of its seeming ubiquity,” said Andrew Grant, partner at Runway LLC, a legal consulting firm for financial services companies and fintechs. “Reddit has this built-in ecosystem already that lends itself to people creating subreddits for financial services.”
CFPB penalizes credit union over ‘botched’ digital banking upgrade
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Two federal agencies announced a penalty against VyStar Credit Union over what the agencies called a “botched rollout of a new online banking system” in May 2022, caused in part by a lack of management and governance over the vendor it selected for the project, according to the agencies.
The rollout glitches caused members of the credit union, headquartered in Jacksonville, Florida, to incur nonsufficient funds fees, late fees and the like because they could not access their accounts amid outages and service degradation, according to the Consumer Financial Protection Bureau and National Credit Union Administration.
The credit union must pay $1.5 million to the CFPB’s victim relief fund, set up a process to identify members who incurred fees as a result of the service disruption and reimburse those members, with interest, according to the consent order it signed with the CFPB.
The CFPB wants states to subject banks to data privacy laws
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David Paul Morris/Bloomberg
This month, the Consumer Financial Protection Bureau warned that the exemptions to data privacy laws that banks, credit unions and lenders enjoy undermine consumer rights and suggested that states act.
The CFPB report does not indicate the bureau will change its enforcement or interpretation of existing law. Even if it had, these changes would be subject to change by the next director. Rather, the report concludes that states have reason and ability to subject banks to data privacy laws, and that they should consider doing so.
Second Trump era expected to breathe life into fintech funding
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Venture capital funding in fintechs is likely to reverse its decline over the next four years, as President-elect Donald Trump ushers in a pro-business, deregulation-friendly administration.
“The economy is on strong footing and the markets reacted well to the election news,” said Tyler Griffin, co-founder and managing partner of fintech venture capital firm Restive Partners. “Market sentiment tends to create its own reality, so unless or until we have an objectively bad policy announcement, I expect that sentiment to lead to more funding, fueled by lower interest rate expectations.”
Fintech funding surged in 2021 to $53 billion as the COVID-19 pandemic brought a consumer and business shift that buoyed interest in fintech startups. The money dried up as interest rates rose and investors sought profitability instead of growth from startups. In 2024, VC funding to fintechs is expected to reach $15 billion, according to anÂ
Citizens to pair AI agents with automation to improve productivity
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Citizens Bank is aiming to deploy technology that would allow AI agents to plan, work and make decisions with minimal human oversight.Â
Citizens is working with software provider UiPath, which at its October annual product conference announced new agentic AI tools as part of its automation technology suite. The new capability combines AI agents, robots, people and models to expand the scope and impact of automation efforts, according to the company.
Matt Lavoie, senior vice president of enterprise automation development at Citizens, said the bank plans to integrate some of the AI models developed by Citizens’ internal experts with automation software from UiPath.
