By Ray Birch
WASHINGTON— Open banking may no longer be a looming regulatory requirement for most credit unions—but ignoring it could still prove costly.
That's the message from Jane Barratt, chief advocacy officer at MX and co-chair of the Financial Data Exchange (FDX), who says credit unions should stop viewing open banking solely through the lens of CFPB Section 1033 compliance and instead recognize it as a competitive necessity.
While the Consumer Financial Protection Bureau has sent a revised proposal for the long-delayed rule to the White House, Barratt believes only the nation's largest financial institutions—likely those with more than $10 billion in assets—will ultimately face a compliance mandate. For everyone else, she said, the business case is becoming far more important than the regulatory one.
The most important thing for credit unions to know is this is something their members want to do," Barratt told CUToday.info. "They want to connect their accounts. They want a 360-degree view of their money. They want to pay where they want to pay, invest where they want to invest, and having that secure connection into their credit union is really becoming a business necessity."
Section 1033 stems from the Dodd-Frank Act and would require financial institutions to make consumer financial data available through secure application programming interfaces (APIs) when authorized by consumers. The CFPB finalized a rule in 2024, but implementation stalled after legal challenges from banks and concerns over the Bureau's authority and funding.
The current Administration has since signaled it is rewriting the regulation, and Barratt said the proposal has remained an active project inside the CFPB for months.
"What we understand is that it's a notice of proposed rulemaking that has largely been finalized and has been moving back and forth between the Bureau and Treasury," she said. "This is a very active issue. It doesn't need another administration or another Congress to move forward."
Not A Reason To Delay
Barratt expects the revised proposal to significantly narrow the number of institutions subject to mandatory compliance by raising the asset threshold to approximately $10 billion, compared with the much broader reach contemplated previously. But she cautioned that smaller credit unions should not mistake that as permission to delay investment. Open banking, she said, has already been operating in practice for years through secure, permissioned data sharing, and members are increasingly expecting those capabilities. Without them, consumers often resort to less secure methods such as credential sharing and screen scraping to connect financial apps and accounts.
Beyond regulatory compliance, Barratt argues open banking is becoming one of the most valuable strategic tools available to credit unions. Rather than simply allowing data to leave the institution, modern open banking enables members to bring outside financial relationships into the credit union, giving institutions a more complete picture of members' finances.
That visibility can reveal opportunities to refinance higher-rate loans held elsewhere, identify larger deposit relationships outside the credit union, or determine which budgeting, investing and lending tools members are using so institutions can better compete, Barratt said.
"Open banking is a channel," she said. "Just like your mobile app or online banking is a channel. It's probably the cheapest source of research and development a credit union can have because you can actually see what your members are doing in real time."
Barratt also believes the economics of adoption have changed dramatically. Early concerns that open banking APIs would be expensive and technically difficult have eased as standards developed by the Financial Data Exchange have matured and most core processors and digital banking providers now support API connectivity. As a result, she expects implementation costs and time-to-market to continue falling.
Meanwhile, another key question in the CFPB's rewrite—whether financial institutions should be allowed to charge third parties for consumer-permissioned data access—could shape the competitive balance between banks, credit unions and fintechs. Regardless of where regulators land, Barratt said credit unions should begin treating open banking as a growth strategy rather than waiting to see whether they are legally required to comply.
"If you've already invested, keep investing," she said. "If you haven't, it's time to start. Members are already using this, and the institutions that embrace it will have a much better understanding of how to serve them."