6 days ago
Information Is Extraordinarily Valuable. How Dangerous To Make It Free
Creative / Feature: Waze und Google Maps-App auf einem iPhone (Photo by Hoch Zwei/Corbis via Getty ... More Images)
Google purchased Waze for $1.15 billion in 2013. Why would it pay so much for an app that people can access for free, and that charges them nothing for usage?
The answer is that information is incredibly valuable. While Waze once again doesn't charge anyone for usage and directions, how people use it along with when and where people go with it is surely valuable to businesses eager to meet and lead the needs of an acquisitive public.
The price paid for Waze back when $1 billion was $1 billion is useful to think about as conservatives get all worked up about the removal of Rule 1033 from the GENIUS Act. The Rule, one whose implementation was initially cheer-led by former CFPB head Rohit Chopra, mandates that banks and other large financial institutions provide outside businesses free access to information gathered about existing bank customers. Something's wrong with this Rule, which is more than an understatement.
To understand why, please yet again contemplate the 2013 acquisition of Waze. If the information produced by the latter rated such a high acquisition price, stop and think what large financial institutions could command for databases pregnant with knowledge about the saving, investing, and buying habits of hundreds of millions of clients and depositors.
In contemplating the above, stop and think about the shareholders of the largest financial institutions, and their understandable expectation that the institutions they own maximize their profit-making potential. Considered in that way, Rule 1033 quickly becomes much more than a costly regulatory burden foisted on large financial institutions. Worse than that, it becomes a subsidy for the myriad other businesses inside and outside of finance eager to poach some of the most remunerative customers in the world while armed with some of the best information. No business can give away something so valuable for free.
From there, just ask why FinTechs and other non-bank entities would be so interested in accessing information about big bank customers in the first place. Rest assured that the interest isn't rooted in staring lovingly at the data. See above.
What banks go to great expense to compile and store in highly protective fashion is extraordinarily valuable to businesses outside the banking system for the same reason that it's valuable to the entities compiling it. Translated, they're eager to use the information gathered by the big banks with an eye on courting those same customers with products and services not just tailored to meet their individual needs, but to lead them.
Which easily explains why banks and financial institutions have begun charging a fee for access to the information. It's not just that there are substantial costs associated with compilation, it's that there must be compensation for creating crucial knowledge that is so valuable to so many.
What's puzzling is that these truths are even being debated. More puzzling is that some of those debating them are conservatives who, at least in the past, would have been the first to defend businesses against price controls foisted on them from the proverbial Commanding Heights.
Rule 1033 isn't just wrongheaded and a price control, it's also anti-customer exactly because it mandates giving away what's crucial and valuable for free. If there's no value in producing essential knowledge about customers, what's the point of continuing to create what businesses of all stripes very much require to meet and lead the needs of their customers?
