The Consumer Financial Protection Bureau is moving toward open banking regulation

  • The CFPB is seeking guidance on rules governing consumer access to financial records, a move toward possible open banking-style regulations in the US.
  • And such centralized financial data sharing rules would give consumers greater control over their financial lives.
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The Consumer Financial Protection Bureau (CFPB) has issued an advanced notice of proposed rulemaking that seeks comments and information to assist the bureau in implementing section 1033 of the Dodd-Frank Act, which will determine how consumers' access to their financial information is regulated. A future decision by the CFPB could put the US on a path to a more standardized open banking system, similar to that of the UK.

To this point, consumers' access to financial data sharing in the US has been largely dependent on private-sector efforts. Plaid, for example, already offers consumers who have data at financial institutions (FIs) that cooperate with it the ability to share their data with Plaid's network of fintechs.

And Plaid is a member of the Financial Data Exchange (FDX), a financial industry consortium with over 100 members, that has espoused its own data-sharing principles. But this is distinctly different from a governmental body issuing guidance on how FIs—particularly major banks—need to handle financial data sharing, which would carry the weight of a regulatory obligation to comply.

A standardized approach to open banking in the US could make life easier for fintechs, but could also provide opportunities for customer experience boosts for banks. A standardized approach to consumer financial data sharing could enable fintechs to more seamlessly offer enhanced products—like personal finance management or payments tools—to consumers who are willing to grant them access to their financial data, such as their bank account details.

And while this could ostensibly stiffen competition for incumbent banks, it could also open an opportunity for them to expand the suite of features they offer clients, by collaborating more freely with fintechs and third-party services. The bottom line is that consumers are likely to be the biggest winners if the CFPB decides to draft centralized rules that mandate greater consumer control over their own financial data: It could lead to a vast array of new services and a new level of convenience for consumers that can help them take better control of their financial lives.

And though banks remain wary of the potential risks of opening up consumer data to third parties, a regulated approach to sharing it could make implementation easier.

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