Open banking (rule)

The Consumer Financial Protection Bureau (CFPB) has proposed an open banking rule (Proposed Rule) requiring certain financial institutions to allow consumers and approved third-party financial service providers to allow access to a consumer’s banking, transaction, and other financial data known to the financial institution. The CFPB will publish a finalized version of the Proposed Rule this fall.

What is open banking?

The concept of open banking was first introduced in 2003 as part of the open innovation movement and is driven by technological advancements that enabled consumer facing banking to function through new online technologies. Open banking (also known as “open bank data”) facilitates the interconnection of accounts and data across different institutions, providing benefits to consumers, financial institutions, and third-party service providers. Open banking is anticipated to be a major driver of innovation which could revolutionize the banking industry. The result could be a more competitive financial services marketplace as consumers are more easily able to transfer data across financial service providers. The Proposed Rule covers consumer financial data relating to account balances, two years of transaction history, access device information (e.g. account numbers, routing numbers or their tokenized equivalents), account terms and conditions, pending bill payments, and basic information needed to verify the account (e.g. name, address, phone number, etc. of the account holder).
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The top U.S. watchdog agency for consumer financial protection on Tuesday unveiled long-awaited rules intended to drive a shift toward open banking and spur competition, saying they would allow consumers to control and share their own data when shopping for services.
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Ahead of the announcement, CFPB officials said the agency had made some changes to the version originally proposed in response to concerns from industry and public comment, sparing banks with less than $850 million in assets from having to provide data, for example.

Companies will also have more time than originally proposed to come into compliance. Larger financial technology companies will have until 2026, while the smallest will have until 2030.

Data aggregators, such as Plaid and Akoya, who provide connections among banks and financial tech services, reacted favorably, saying the rule would promote the secure transfer of consumer data. But other trade groups said they were not happy.

Lindsey Johnson, head of the Consumer Bankers Association, said in a statement the CFPB had "contorted" the congressional statute authorizing the rule to enable "thousands of third parties' to access consumers' data."

Ian Maloney, AFC's head of policy, said however that the final rule improperly barred the "secondary use" of consumer data for cross-selling services and targeted advertising.

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... The open banking rule is referred to by the industry as "1033" for the section in the Dodd-Frank Act of 2010 that gave the CFPB authority to implement how consumers control their own financial data.

The CFPB's rule requires that banks safely share financial data on checking accounts, prepaid cards, credit cards, mobile wallets, payment apps and other financial products. Payment apps and other financial products were added in the final rule, sweeping Apple Pay, Google Pay, PayPal, Zelle and Venmo and other apps into the scope of the rule. The change is further proof that third-party apps are dominant forces in banking and payments.

Banks are concerned the rule will expose them to greater liability and also require costly oversight of third-party fintech companies, a tall task in an ecosystem awash with data and a surfeit of fintech upstarts. As the main data providers, banks do have some ability to deny third parties access to consumer data if a company presents risks to the financial system.
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In another change from the proposal unveiled last October, the final rule would allow for some secondary uses of consumer-authorized data by third parties to improve the product or service that the consumer requested without obtaining a separate authorization. Fintech providers and some consumer advocates asked the CFPB to provide for secondary uses of the data to train underwriting models and for anti-fraud tools as well as research and product development.

"The rule is designed to ensure that open banking does not become a new data pipeline that fuels surveillance pricing or other manipulative mischief," Chopra said in prepared remarks for a speech to be delivered at a Fintech Week conference hosted by the Federal Reserve Bank of Philadelphia.
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Consumers have been sharing their bank transaction data for years using the common but risky practice of "screen scraping" — giving usernames and passwords to third parties. The CFPB said that screen scraping brings with it inherent risks, such as overcollection of data, inaccurate data sharing, and the spread of login credentials.

The rule would encourage further the adoption of secure application programming interfaces, or APIs, by enabling the exchange of data in a standardized format. The CFPB has already received an application from the Financial Data Exchange to be recognized as an industry standard-setting body of data formatting standards.
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Voodoo said:

My social credit is Trash. And I'm damn proud of it.

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Casey Jones said:

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No Marketplace for YOU. ...

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pmbug said:

I know a lot of folks in the goldbug community are hostile to crypto, but I really see the war on crypto as the primary battleground for a free market payment gateway alternative to the social credit financial cage that the certain parties in this world are seemingly trying to build.

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nickndfl said:

I would like to buy some of the BRICS units when they are available.

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