Most People Never Actually Read Terms and Conditions, But It's a Major Data Risk

Covid fueled a record expansion of desktop and mobile fintech applications, yet nearly three quarters of their users have no knowledge of how safe private data on them is.

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Opinions expressed by Entrepreneur contributors are their own.

Unless otherwise indicated, figures and other financial industry statistics have been sourced from The Clearing House's 2021 Data Privacy and Financial App Usage Consumer Survey.

Principally because of the Covid-19 pandemic, 2021 was witness to significant changes in almost every industry across the globe. Between quarantine requirements forcing work-from-home solutions and in-person activities no longer being available, last year's developments impacted everyone's life in one way or another. In the financial industry, fintech solutions and financial apps brought about their own sweeping disruptions. But what will be the lasting significance of the rise of fintech solutions and financial apps, and do consumers understand the impacts of these new technologies?

Financial apps' exceptional recent growth

While the use of fintech apps was already increasing prior to the time of lockdowns and other restrictions, they certainly accelerated its growth. Since the start of the pandemic, one out of every three users increased their use of such apps, and the total number of people using them grew by 31%.

This expansion was seen on almost every app in 2021, but newer ones saw the most. CashApp experienced the largest growth, with a 17% increase in usage, while only two, Paypal and Mint, saw a decrease (these also happen to be the oldest fintech apps, with Paypal starting in 1998, Mint in 2006).

Increasing frequency of data breaches

In addition to the increase in use of financial apps, data breaches have become more common, with a 38% jump in the second quarter of 2021 alone, and the issue shows every sign of worsening. By the end of the year, breaches in financial apps are expected to reach an all-time high.

According to a report by Intertrust, 77% of financial apps contain at least one serious vulnerability that cybercriminals can exploit. This overall lack of security throughout the industry is worrisome, to say the least. Each of these fintech apps stores sensitive data on their users, making these types of breaches a significant risk.

Related: Fintech Leads the Way in Fair Lending Practices With a New Kind of 'Relationship Banking'

Knowledge disconnect among users

Despite the increased threat of data breaches when using financial apps, consumers still lack an understanding of who can access their financial data when signing up for them, and to an alarming extent. No less than 73% of users do not even know these apps have access to their bank account username and password, yet that same percentage of users are confident that their information on them is both private and secure. This marks a clear disconnect between what consumers think they know and what they actually know; the expectation is that fintech apps offer security and remain transparent about the data they collect, but in reality this is not the case.

Most such apps fall short in meeting three key consumer expectations; transparency, data privacy and consumer control. Each of these revolves around what data apps collect on consumers and how that data is stored and used. Instead, consumers have almost no control over the data collected, what it's used for and even information on what information is collected. Such demands should not be unrealistic, as they stem from the same expectations set by traditional banks. (After all, Paypal's more than 60 million customers gives it a much larger footprint than most banks.) Given the impact of these fintech companies, consumers need to further their understanding of how these apps operate and make a profit.

Related: 50 Things You Need To Know To Optimize Your Company's Approach to Data Privacy and Cybersecurity

Data aggregators are largely unrecognized

The nature and function of financial apps' data aggregators are almost entirely unknown by consumers: 80% of them do not know that these apps use third-party providers for collecting and storing the financial data of users, and even fewer know that these aggregators can sell their data for a variety of purposes. And the scope of these institutions is staggering: Just a single data aggregator stores banking data from 25% of U.S. bank accounts, which means it has data on more U.S. accounts than the top two U.S. banks combined. Even with this massive amount of consumer data stored by a single data aggregator, consumers have absolutely no relationship with them, and most are not even aware of their existence.

Where these disconnects stem from

Given the severity of the disparity between what consumers think they know about financial apps and what they actually know, a search for both cause and cure is vital. One potential issue could be that 77% of consumers admit they do not read the terms and conditions of the apps they use. If they had, they'd be better able to understand what data is being collected and stored, as well as how it's used. A key aspect here is that such terms and conditions need to be actually understandable. In reality, a majority of users who do the work of reading them still don't come away with workable knowledge… essentially aren't able to digest the legalese.

Related: A Step-by-Step Guide To Building Your First Mobile App

Throughout the fintech industry, there seems to be a severe disconnect between what consumers think they know about the apps they use and the reality of those apps. Most consumers do not understand what financial data is collected, how it's collected and what it's used for despite being confident that their data remains private and secure. Where this lack of understanding is leading us remains a mystery, but there seems to be a clear lack of transparency within the industry, and a clear need to address it.


Entrepreneur Leadership Network Contributor

CEO of Zil Money Corporation and Tyler Petroleum Inc

Sabeer Nelli, founder of, and Tyler Petroleum, is a successful East Texas businessman. Nelli is always building better software solutions in partnership with more than 70 dedicated developers and teams. Over 400,000 SMB use the platform for their AP/AR.

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