You installed Venmo at 2 AM in the morning as your friend was pressuring you to split the Uber fare right away. The interface was decent, registration took only thirty seconds and you were too lazy to read the terms of service. Congratulations! You have just legally signed an agreement that will make a Victorian era lawyer cry. We do not read the small print but we should start.
The average fintech app agreement is 12,000 words long. That is approximately the length of a novella but with twists of binding arbitration and third parties which have access to your information. Companies such as Cash App, Robinhood and Chime are aware of that fact and take advantage of your laziness. They bank on your impatience which is actually what makes them money.
The Arbitration Clause
Try to find the phrase “binding arbitration”. This means that you give up your rights to go to court in case something bad happens. If Plaid has leaked your credentials in the banks or SoFi has frozen your account for three weeks – you cannot sue them. Instead, you are required to enter into a process of private arbitration that always favors the company and is never used by consumers because it is complicated.
Data Sharing and Third Parties
Find the chapter called “Information we share”. Companies such as Robinhood earn lots of money by selling transaction data to hedge funds and marketing agencies. Remember how Venmo used to have that public feed where you could see what other people are buying? Check whether the firm is sharing the information with marketing partners, analytics providers or affiliates. In other words, if the number of third parties involved is greater than the number of items in your grocery shopping list – your spending habits are another of their products.
Limitations of Liability
Try to see how much money is the maximum compensation for your troubles. In most cases, liability of apps is limited to the amount of fees which you paid during the previous twelve months. And if you did not pay anything in fees, then the maximum compensation that you can get equals to the number you have paid – zero dollars. It may sound rough but it is true.
Push Notifications and Updates
In general, companies reserve the right to update their terms at any time. Most of them notify you of the changes via push notifications or automated email that you immediately delete. You agree to the new terms by using the app after the change has been made. This is a form of passive consent and it works for the benefit of the firm.
Conclusion
It is not necessary to memorize all the clauses mentioned above but your best ally is Control-F button. Enter the phrases “arbitration”, “waiver”, “third parties” and “liability”. Spend five minutes reading the agreement now rather than realizing that you gave your firstborn to a payment processor later.