Donald Trump likes to say you learn very little from a tax return. TurboTax thinks you can learn a whole lot, and that it can earn a whole lot from it, too.
This tax season marks the latest effort by TurboTax, Intuit's popular tax software, to open up its platform to a range of outside developers. Those partners will be able to see anonymized data from your tax form, if you let them. They will then determine if you're a candidate for what TurboTax said will be money-saving financial products or services. If you want to pursue an offer, you share your personal data with the partner. If you complete a transaction and, say, refinance a loan, TurboTax gets a payment.
Intuit has pulled off a similar type of project in its operation that focuses on small businesses. Since it opened up its QuickBooks small business accounting platform about five years ago, some 3,000 developers have integrated their applications into the platform. The general manager of the Small Business and Tax Group is now general manager of the Consumer Tax Group.
The company's new pitch comes as financial services companies race to offer just-in-time products or services tailored to a customer's financial and behavioral profile-and as concerns over privacy and fraud are at their peak. TurboTax said it has set a high bar for developers it would partner with and that it maintains strict privacy policies.
Here's how the service, still in its early days, works.
Right now, Earnest, a no-fee student loan refinancing company, is TurboTax's only partner. The company, which launched in 2013, announced in November that it had refinanced more than $1 billion in student debt and saved borrowers more than $300 million over the life of their loans. On average, refinancing with Earnest saves users around $22,000 over the life of a loan, said Louis Beryl, the company's chief executive officer. TurboTax estimates that five million of its more than 30 million users could benefit from refinancing.
Earnest's API connects with TurboTax, so if a filer consents to sharing tax information and allows a soft credit pull (one that won't ding a consumer's credit score), some of the data are used to calculate a personal savings estimate.
"We can see their credit report, we see their income, and we will be able to make estimates for their level of assets," said Beryl. "Taxes show the amount of student loan debt and student loan interest. We can triangulate and make an estimate of what we can offer and how much they could save, with a very high degree of confidence."
In the first stage of the project with Earnest, the company gets a large batch of identifiable information including name, age and address from TurboTax users who opt to share their data. "In subsequent phases with Earnest, as well as when we onboard other partners, we absolutely will have a step where data first shared to create an offer will be anonymized," said Julie Miller, a spokeswoman for Intuit.
Tax information can provide a better picture of a consumer's financial health than a credit bureau can, said Alan McIntyre, senior managing director of global banking at Accenture, since it has "both sides of your personal balance sheet-the investment side and income side and the credit side."
Filers who use the new service will see potential savings figures after they have e-filed. They are shown information about federal loan benefits before Earnest begins the refinancing application.
There are potential problems, among them the legal protections a student loan borrower would lose when refinancing into a private student loan. Also, restructuring the loan through another government program might be a better choice than going with a private lender.
Miller said it is very clear to all consumers who receive a private refi offer that they'll be giving up federal benefits, and the system details those income-driven repayment and public service loan forgiveness benefits.
In coming months, TurboTax will be able to detect which offers, both federal and private, that a user qualifies for and "even suggest appropriate federal options above a private refi if it makes more sense for that consumer," Miller said.
All this personalization has the potential to help consumers when used by reputable companies that put consumers first.
But all the data the company is using -- with your permission -- to calculate those offers? That's the real gold.
"It's going to come down to who has the best information and who has the customer trust to play that kind of role as an adviser to you," said Accenture's McIntyre. "There is a growing awareness that your consumer information is an asset, and people expect something beneficial from sharing their information."
Letting a company share your financial data is a big decision, perhaps too easily executed with a click.
"Looming as a serious threat is that we have no data privacy, and our financial data can be taken advantage of," said Jeff Chester, of the nonprofit Center for Digital Democracy, an advocacy group. "Consumers are confronting a very risky world where they will be constantly bombarded with sophisticated pitches to buy products they don't need."
TurboTax's head of product, Varun Krishna, acknowledged the premium on privacy. "Data is very valuable, so we have to be very careful about what partners we pick and trust," he said.
"Intuit has rigorous data stewardship and privacy principles, and we're partnering with companies, starting with Earnest, whose standards are consistent with ours," Miller, the spokeswoman, said. That includes not selling, publishing, or sharing data a customer entrusts to Intuit that could identify that customer, or any person, without explicit permission, she said.
"One of the real problems with so-called anonymized data is the issue of re-identification," said Paul Stephens, director of policy and advocacy at the nonprofit Privacy Rights Clearinghouse. "A company may take away your name and personally identifying information, but if there are enough data elements, it's possible to find out who the person is." If you know somebody's ZIP code and date of birth, for example, there's a good chance you can identify that individual, he said.
Should you trust TurboTax to present the best deal for you in areas outside your taxes, and not just the deal that rewards it for a successful referral? Krishna said the company is focused on helping people achieve their goals. Still, it has no fiduciary duty to act in your best interests.
On the plus side, TurboTax's customer base is valuable, not an asset it is likely to put at risk. And sometimes you're willing to forgo the best deal possible if the deal in front of you is convenient, Accenture's McIntyre noted.
"Instant gratification is a very well-known psychological trigger," he said.