NEW YORK—Following the release last week by the CFPB of new protocols aimed at facilitating open banking, a new analysis is offering some insights into what it’s going to mean for financial services, credit unions, members, consumers and more.
Open banking allows consumers to share their bank and credit card account data with third-party providers, including fintechs, while maintaining ownership of their data
Defining and protecting consumers’ data rights is a critical part of the process, PaymentsJournal noted.
“Open banking, which will expose third parties and non-banks to financial data at insured banks, is a natural area for the CFPB to choose to cover,” said Brian Riley, co-head of payments at Javelin Strategy & Research, according to the report. “Open banking is moving quickly across the world, and many regulations are not in place to ensure non-banks have the same rigors as banks. To protect all parties, the CFPB should be considered a welcomed ally in this area as the U.S. moves into open banking.”
As CUToday.info reports elsewhere, the degree to which the CFPB is welcomed remains unsure at this point.
‘A Long Way to Go’
“But there is still a long way to go. Open banking has been in the works since 2010, when Congress passed a Personal Financial Data Rights law,” PaymentsJournal said in its analysis. “In October 2023, the CFPB said it would propose a rule to implement those rights. The rule finalized this week set forth the qualifications to become a recognized industry standard-setting body that would assess consumer privacy rights.”
Counting on the Industry
The CFPB has said it plans to rely on industry and consumer advocates to set the technical standards for open banking in the U.S.
“The CFPB will not recognize any standard-setting organization that is rigged in favor of any set of industry players,” the Bureau stated in a release. “The process must be open to all interested parties, including public interest groups, app developers and a broad range of financial firms with a stake in open banking.”
One Key Player
PaymentsJournal noted that Mastercard, for example, has been a “key player positioning itself in this space. Its collaboration with Worldpay allows consumers to facilitate direct bill payments from their bank accounts and authorize the sharing of their data without it being stored.”
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