As the world moves to a digital financial sphere fueled by real-time data, the way we bank will change. A new concept of banking, called open banking, is becoming more popular. Open banking technologies allow third-party service providers to access consumer banking, transactions, and other financial data through secure APIs. The goal of open banking is to enable more personalized and competitive financial products and services, improve transparency, and give consumers and businesses more control over their financial information.
In June 2024, the Consumer Financial Protection Bureau (CFPB) set in motion a “process” for setting data sharing and technical standards for open banking. Regarding those technical standards, the agency said, “Federal regulations with very granular technical requirements could rapidly become obsolete, while industry-led standard-setting would be better able to keep pace with changes in the market and technology.” The CFPB has recognized that the current standards may not protect consumers and businesses.
But as open banking evolves, who sets the standards for what is and isn’t acceptable? While user feedback is crucial, regulatory bodies such as the Consumer Financial Protection Bureau (CFPB) must play a primary role in setting these standards. More people and businesses are using open banking tools every day. PYMNTS Intelligence has found that 46% of consumers are highly willing to use open banking payments for at least one product or service. That number is only going to grow in the coming years.
As an independent treasury strategist, I think the evolution of open banking is at the top of many of my customers’ minds. I see many ways these tools could help businesses grow and better manage their financial data. But right now, the technology is not quite there. While regulatory boards like the CFPB are investigating standards and protections, I think it essential to ask “What do businesses want from open banking?”
- Easy access to third-party APIs: Consumers can efficiently utilize open banking connections with third-party APIs by adding credit cards and bank account information to apps and products. However, the process often involves rigorous verification procedures and significant time delays for businesses.
- Fraud protection: When using open banking tools, consumers generally have robust fraud protection measures, such as two-factor authentication. These protections can be more complex to implement for businesses that share financial information among multiple users, leaving them more vulnerable to fraudulent attacks.
- Data access: Open banking aims for accessibility and transparency, allowing real-time financial information to guide decisions. However, many businesses still struggle with data ownership and easy access, which are top priorities for those looking to leverage open banking tools.
As an independent treasury strategist, I stay current with the latest financial trends and technologies. I am closely watching the developments in open banking, as they have the potential to change the way businesses manage their finances. Right now, open banking tools are much easier for consumers to use, but I hope that soon, companies will be able to use open banking tools just as easily!
