US chasing Open Banking lead with new consumer data rules
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The US is moving closer to adopting a safe and reliable Open Banking ecosystem with new rules around data sharing, one of the country’s key regulators has asserted.

Announced today by the Consumer Financial Protection Bureau (CFPB), the rules concern data sharing across bank accounts, credit cards, mobile wallets, payment apps, and other financial products.

Financial institutions, credit card issuers, and other providers active in the US will be required to unlock consumers’ personal finance data and transfer it to another provider if requested by the consumer. 

The CFPB hopes that this will enable customers to switch providers with more ease, which will in turn encourage financial services firms to provide better quality services.

“Too many Americans are stuck in financial products with lousy rates and service,” said CFPB Director, Rohit Chopra. “Today’s action will give people more power to get better rates and service on bank accounts, credit cards, and more.”

Could this be the game changer for US Open Banking?

The rules will have consequences far beyond customer service. As data sharing is a central element of Open Banking, being the practice that the tech hinges on, these rules could prove crucial to the evolution of the US Open Banking ecosystem.

Giving customers greater voice on authorising third party access to data will prove critical to how Open Banking functions. The fact that financial providers will be required to make data and personal information available without charging fees may provide an added incentive for Americans to engage with Open Banking.

Perhaps most significant are new rules around privacy protection. Personal financial data can only be used for the purposes requested by the customer, and third parties cannot use data for their own benefit.

The CFPB aims to move away from ‘screen scraping’, whereby consumers provide account passwords to third parties which then use data indiscriminately. In various markets, not just the US, consumer concerns around data privacy have been a major factor holding back Open Banking development and adoption.

Speaking at the Payment Expert Summit last month, for example, Rahul Das, Director of Payments at betting and media firm LiveScore Group, shared his view that Open Banking is ‘too complex’ for many consumers, and that – speaking from his experience in the gambling industry – handling too much consumer data could prove troublesome for operators.

By introducing more rules around data protection and privacy, the CFPB openly hopes to see more adoption of Open Banking-type technologies like pay-by-bank. To complement its ban on what it calls ‘bait-and-switch data harvesting’, the regulator has also enforced new revocation and deletion rights, whereby a person can revoke access to data immediately.

Open Banking adoption is being experienced across the world, with the Nordic markets a traditional leader in this space. The UK has emerged as another leading contender, with the encouragement of the government under both Conservative and Labour administrations.

The US, however, has been cited as a country which is rapidly catching up on Open Banking adoption, alongside others like Australia and India. Some, such as Bank of APIs’ Head of Regulation and Standards, Stephen Wright, have noted the US’ lead in standardisation as providing a good foundation for Open Banking’s growth.

With its new rules, the CFPB asserts that the US is moving “closer to having a competitive, safe, secure and reliable ‘open banking system’”. It adds that the new rules form part of its efforts to activate Section 1033 of the Consumer Financial Protection act, enhanced by Congress over a decade ago in 2010.

“This is the CFPB’s first significant rule to accelerate responsible open banking in the US, and the CFPB will be developing additional rules to address more products, services, and use cases,” the regulator’s statement stressed.

“The rules will boost competition by giving people more freedom to switch banks or providers and shop around for the best deal. This increased choice will incentivize financial institutions to offer improved products that help them attract new customers and retain old customers.”