The Federal Reserve Bank of Atlanta published a blog regarding open banking in the U.S. titled, American Consumers May Soon Have Open Banking. I would contend that we already have open banking. Although I am not sure “open” is the right word to use, as it isn’t particularly open and available to all. Permissioned consumer data can only flow when the keeper of the data, often a financial institution, allows it to be shared. I would also contend that it isn’t “open” until the regulatory requirements that are in the works also apply to non-bank fintechs that are holding substantial amounts of consumer and small business financial data.
This blog signals that the regulatory bodies – primarily the CFPB – are ready to announce some new rules of the road for data sharing by year-end. Here’s an excerpt from the blog:
Over the last several years, a number of major banks have blocked third parties from screen scraping. The US banking industry has instead favored the use of application programming interfaces (API) because they allow customers to use third parties without giving up their logon credentials. API use is also the mandated process in the United Kingdom.
Congress mandated open banking through section 1033 of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, giving the Consumer Financial Protection Bureau (CFPB) the responsibility of developing rules around sharing consumer financial data. In October 2020, the CFPB issued a notice of proposed rulemaking regarding consumer access to financial records. The CFPB, however, cannot act alone—it is required to consult with the federal regulatory agencies (Federal Reserve, Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, and Federal Trade Commission) to ensure that its rules do not favor any particular technology.
As a final checkpoint, the Small Business Regulatory Enforcement Fairness Act requires the CFPB to get feedback from a panel of small business owners about how the proposed rule will affect them. It is likely that the formation of this panel and their final report will not be made before the end of 2022. The Retail Payments Risk Forum team will continue to follow developments on open banking coming to the United States.
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group
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