TLDR: Consumers Will Drive Open Banking, Not Regulators

Momentum is building for U.S. financial services to operate on “open banking” principles, in which consumers control directly how their financial data is used. Yes, the government is poised to enforce new rules, but the decisive demand is coming from the marketplace. Banks need to respond.

The United States has been considered to be lagging behind in the race towards “open banking” when compared to the United Kingdom and Europe, where banks have been mandated to share data. However, some argue that this perception doesn’t reflect the reality of the American market. While Europe and the UK have approached open banking through regulation, the US has seen consumer demand drive the need for open banking. Young, digital-native customers in particular are demanding greater control over their financial data.

Although some major US banks have historically resisted open banking, the US open banking ecosystem has still evolved significantly, often through partnerships with fintech companies. However, there are logistical challenges to open banking, including concerns about data breaches and privacy, compliance burden, and potential liabilities.

The Consumer Financial Protection Bureau (CFPB) has proposed a rule that focuses on consumer control of personal financial data. However, the American Bankers Association and others in the industry have raised concerns about operational expenses and liability. In addition, questions remain about which institutions and types of data the rule will apply to.

Despite the challenges, many in the fintech industry believe that open banking is already widespread in the US due to consumer demand. They argue that the CFPB is playing catch-up with its proposed rule.