The U.S. is One Step Closer to Making Open Banking a Reality

The CFPB paved the way for open banking rulemaking. Now is the time to expand on it.

This year at Money 20/20, Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra laid out plans to finalize open banking rulemaking, bringing the U.S. closer than ever before to developing an open banking ecosystem. If all goes according to plan, the CFPB will issue a proposed rule in 2023 and it will go into effect in 2024.

We at Envestnet applaud the CFPB for pushing ahead with rulemaking that will transform Americans’ ability to share their financial data seamlessly and securely with third-party financial service providers, and in turn, get a more holistic and accurate view of their financial lives. Through open banking, consumers have more choices and access to a broader universe of solutions to help them optimize financial wellness. It will give them better access to more efficient and personalized digital platforms that will help them track spending, stick to a budget and achieve their financial goals. The timing is critical as we exit 2022 with more uncertainty about the economic environment ahead.

We’re excited to see that CFPB rulemaking recognizes that the consumer should determine who has access to their data and for what purpose, not the holder of the financial data. Along with putting the decision making in the hands of the consumer, the rulemaking covers the critical data that consumers interact with, including credit card and bank transaction information, which is probably the most important data for helping underserved consumers with their finances.

These pending rules will meaningfully improve customer-permissioned data access and competition in the financial services sector, which will help Americans better understand and manage their finances. While this is a significant first step, there are elements of the rulemaking that we believe should be enhanced, including the need to cover more financial institutions and add additional use-cases.

The CFPB’s proposed rulemaking covers 2,000 of the biggest banks in the U.S., which represents a large portion of customer accounts across the country. However, the majority of U.S. financial institutions, which include regional and community banks, have not yet built dedicated data access portals, and routinely cite the significant time and resources required to do so as a challenge to a faster transition in the marketplace. This means that large populations of Americans, including the underserved, cannot benefit from this open banking ecosystem.

For open banking to fully function, we believe all financial institutions should be required to deploy dedicated data access portals and be given a timeline to do so that is sufficient for smaller financial institutions. Beyond the self-evident customer benefits of such an approach, including more reliable and secure third-party data access, there are concentration risks associated with having only the largest data providers deploy APIs.

We also believe the CFPB should expand its initial definition of “covered accounts” under a Section 1033 rulemaking to include brokerage accounts, mortgages, non-credit card loans and more – use cases that customers rely on today to manage their financial wellbeing. Including these types of accounts would facilitate improved customer access and reliability with third-party connectivity and improve financial outcomes.

We commend the Bureau for its thoughtfulness as it enters a rulemaking process to implement a critical financial data access right for customers across the United States. This is a crucial step in moving the U.S. to an open banking ecosystem, which will help many Americans have a more holistic view of their financial situation and allow them to best plan for their financial futures. For this to happen, it will be important for the Bureau to expand the scope of its forthcoming Section 1033 rulemaking to include a broader swath of both covered parties and require as many financial institutions as practicable to build and implement dedicated data access portals.

The statements contained herein are based upon the opinions of Envestnet and third party sources. Information obtained from third party sources are believed to be reliable but not guaranteed. All opinions and views constitute our judgments as of the date of writing and are subject to change at any time without notice.