Future of Open Banking under scrutiny within American financial landscape amidst regulatory upheaval
The debate titled 'The New Era of Open Banking in the United States' recently took place under the moderation of Eyal Sivan, marking the first Powerhouse Debate of the Open Banking Expo USA. The discussion addressed the political upheaval and legal wrangling surrounding Section 1033 of the Dodd-Frank Act, which pertains to the Personal Financial Data Rights Rule.
In October 2024, the Consumer Financial Protection Bureau (CFPB) finalized its open banking rule under this section, aiming to formalize consumer-permissioned data access and create a standardized Open Banking framework in the US. However, the rule has been met with legal opposition from banking groups, leading to a lawsuit challenging the rule. As of May 30, 2025, the CFPB filed a motion for summary judgment, arguing that the rule exceeded its statutory authority and calling for its vacating.
Financial institutions have expressed concerns about the rule, citing high compliance costs and the lack of clarity on liability for data misuse. Banks argue that these issues could compromise their ability to protect consumer data effectively. On the other hand, fintech companies generally support open banking, seeing it as an opportunity to enhance consumer financial services and increase competition. However, they also face challenges related to data security and liability under the current framework.
Consumer advocacy groups often support open banking as a means to give consumers greater control over their financial data. However, they also emphasize the need for robust protections against data misuse and fraud. The potential vacating of the rule could impact these groups' ability to advocate for consumer rights in the financial data space.
The debate saw panelists discussing the need for clear consumer data rights with strong consent mechanisms, provisions for liability sharing and onboarding scalability, and a level playing field across banks and fintechs in an enduring Open Banking regulation. Angelena Bradfield, head of policy at the Financial Technology Association (FTA), supports regulated Open Banking, emphasizing the importance of a durable rulemaking process that isn't frequently challenged in courts.
Andrew Morris, director of innovation and technology at America's Credit Unions, mentioned that larger credit unions are already considering Open Banking. Data portability is considered important by these credit unions, as it could improve financial management and access to services for consumers.
Jacob Parker, CEO of Fiskil, discussed Australia's Consumer Data Right (CDR) as an example. Parker praised Australia for establishing clear data privacy principles around data retention and usage. Abandoning a unified federal approach could lead to a costly, fragmented patchwork of state-level rules, according to Fiskil.
The panel agreed that the US financial ecosystem, with over 10,000 financial institutions, is unique in the world. Ozone API's Sivan noted this uniqueness, stating that the US financial ecosystem presents both opportunities and challenges for Open Banking.
In conclusion, the future of Section 1033 remains uncertain as legal and regulatory debates continue, with stakeholders weighing the potential benefits of open banking against concerns about data security and regulatory compliance. The panelists expressed optimism that Open Banking in the US will emerge stronger from this challenge, though perhaps on a longer timeline than once hoped.
- The Consumer Financial Protection Bureau (CFPB) finalized its open banking rule under Section 1033 of the Dodd-Frank Act in October 2024, aiming to regulate consumer-permissioned data access and create a standardized Open Banking framework in the US.
- Fintech companies generally support open banking, viewing it as an opportunity to enhance consumer financial services and increase competition, but they also face challenges related to data security and liability under the current framework.
- Consumer advocacy groups often support open banking as a means to give consumers greater control over their financial data, but they also emphasize the need for robust protections against data misuse and fraud.
- Angelena Bradfield, head of policy at the Financial Technology Association (FTA), supports regulated Open Banking and emphasizes the importance of a durable rulemaking process that isn't frequently challenged in courts.
