As rules and regulatory frameworks around Open Banking are constantly evolving, we spoke to Dave Glaser, President and CEO of Dwolla, who revealed that the CFPB Open Banking rule has potential to drive the expansion of Open Banking.

Payment Expert: Firstly, are you able to tell us more about the CFPB Open Banking rule?  

Dave Glaser: The CFPB Open Banking rule aims to require financial institutions to provide customers with their financial data in a machine-readable format. It builds on Section 1033 and aims to create a comprehensive open banking framework in the US. This rule would enable consumers to share their financial data with third-party providers, enhancing control and promoting better financial choices. 

Although still being developed, the CFPB has released documents indicating potential provisions. These include consumer consent for data sharing, data security measures by third-party providers, and the use of common standards for data sharing to facilitate an easier switch between financial services. The CFPB has not released a final proposal yet, but these insights shed light on the rule’s scope and impact.

PE: What can the rule do for the expansion of Open Banking? 

DG: The CFPB Open Banking rule has the potential to drive the expansion of Open Banking in several ways. Firstly, by establishing a regulatory framework, the rule would provide clarity and guidelines, encouraging financial institutions and third-party providers to participate in Open Banking initiatives. 

Secondly, the rule would prioritise consumer protection by setting standards for data privacy, security, and consent, fostering trust and wider adoption of Open Banking services. Thirdly, it would promote competition and innovation by requiring data sharing between financial institutions and authorised third parties, enabling the development of more consumer-centric products and services. Lastly, the rule could foster interoperability and data standards, making it easier for consumers to switch between providers and encouraging collaboration within the financial ecosystem. 

PE: What steps do you believe can be taken to ensure that Open Banking isn’t hindered by increased regulation?

DG: A successful open banking regulatory framework should prioritise clarity and consistency, strike a balance between consumer protection and innovation, foster collaboration among stakeholders, and be subject to ongoing monitoring to ensure its effectiveness and address any unintended consequences.

PE: Can you give us some insight into trends on Open Banking adoption in recent years? 

DG: Open Banking adoption has surged globally in recent years, driven by key trends. Regulatory developments have played a crucial role, with countries implementing regulations like PSD2 and the UK’s Open Banking Initiative, inspiring others to follow suit. Fintech startups have seized the opportunity, leveraging customer financial data to create innovative services such as budgeting apps and lending platforms. 

Collaborations between traditional financial institutions and fintech firms have emerged, boosting customer experience and expanding product offerings. Consumers are increasingly embracing Open Banking, attracted by the control it provides over their financial data and the ability to access tailored products and compare services. 

Open Banking is also expanding beyond Europe, with countries like Australia, Canada, and Singapore exploring initiatives to facilitate data sharing and drive financial innovation. These trends underscore the growing global interest in Open Banking, fueled by regulatory support, technological advancements, and consumer demand for personalised financial services.

PE: How crucial do you believe Open Banking can be in terms of supporting consumers through a challenging economic period?

DG: Open Banking can play a crucial role in supporting consumers during challenging economic periods. By granting consumers greater access to their financial data and enabling data sharing with third-party providers, Open Banking empowers individuals to make more informed financial decisions, compare services, and find better deals. 

It enhances transparency, fosters competition, and promotes the development of innovative financial products and services. This increased choice and control can help consumers manage their finances more effectively, save money, and navigate economic challenges with greater resilience. Open Banking’s potential to provide personalised solutions and improve financial well-being makes it a valuable tool in supporting consumers during challenging economic times.