CFPB’s Proposed Open Banking Rule Will Require Mind Shift For Banks

The Consumer Financial Protection Bureau (CFPB) in late October released its long-anticipated proposed open banking rule as part of the implementation of section 1033 of the Consumer Financial Protection Act of 2010 (CFPA). If adopted, this requirement would bring consumer-permissioned financial data sharing to the US in a formal way for the first time, helping it to catch up to other jurisdictions like the UK and Europe. However, despite quite a lot of institution-led activity around open banking, the country’s banks don’t exactly seem primed for a true regulatory framework.

Specifically, very few institutions appear to be embracing open banking in its true form — according to CCG Catalyst’s Banking Stability and Innovation Study 2023, only 17% of C-level bank executive respondents in the US said they are committed to providing open data access to third parties. A much greater number — 48% — said they are interested in working with select third-party partners. The problem with this is that it completely misses the point and spirit of open banking. This concept is built around the idea that financial data ultimately belongs to the customer, and that the customer should be able to share it with third parties as they see fit. The bank doesn’t get to choose.