CFPB Aims to to Speed Shift to Open Banking in the U.S.

The Consumer Financial Protection Bureau (CFPB) has taken another step in its push to accelerate open banking.

The U.S. consumer watchdog on Wednesday (June 5) announced it had finalized a rule outlining the qualifications to become a recognized industry standard setting body.

An entity like that, the agency said, would be able to issue standards that companies can use to stay in compliance with the CFPB upcoming Personal Financial Data Rights Rule. 

The rule, the CFPB said in a news release, identifies the attributes that standard setting bodies must demonstrate in order to be recognized by the agency, as well as a step-by-step guide for how standard setters can seek recognition and how the CFPB will evaluate applications.

“Industry standards can be weaponized by dominant firms in order to maintain their market position, undermining competition for all,” said CFPB Director Rohit Chopra. “Today’s rule will prevent these firms from rigging standards in their favor by identifying attributes the CFPB will use to recognize standard setters.”

The CFPB announced the rule in October. It is designed to implement section 1033 of Consumer Financial Protection Act, passed in 2010.

As Chopra said in October, the rule would “give consumers the power to walk away from bad service and choose the financial institutions that offer the best products and prices.”

Section 1033 turns over the financial data owned by the consumer to the consumer to check prices and weigh options, to take competitive bids from providers. 

“At a high level, 1033 — beyond making data available to consumers and third parties — includes a mandate to standardize the formatting of that data,” PYMNTS wrote recently.

Section 1033 represents a step toward “consumer empowerment” in the U.S., Kim Funari, vice president of regulatory compliance at i2c, told PYMNTS last month.

“All companies will be using the same formats and the same security rules,” Funari said. “It’s really leveling the playing field across the financial institutions and across the industry.”

“Open banking involves less red tape and more seamless switching,” Chopra said in March.

Meanwhile, PYMNTS Intelligence research has shown that a substantial portion of Americans support open banking, if it means the ability to make faster payments.

“Consumer Sentiment About Open Banking Payments,” a new PYMNTS Intelligence report created in collaboration with Trustly, found nearly half of the 2,541 U.S. consumers surveyed are willing to use open-banking supported payments, particularly younger consumers. 

“But the support escalates even more for those already familiar with open banking,” PYMNTS wrote in March. “Sixty-eight percent of respondents who already used an open-banking application to pay for at least one item in the last year told us they were generally satisfied. The satisfaction level increased to 82% among high-frequency users.”