Open Banking and its odd three-body problem
- Both banks and fintechs are trying to shift the tide of the Open Banking 1033 regulation in their favor, with banks like Wells Fargo and PNC insisting that fintechs go through bank-backed providers like Akoya for data sharing requests. On the other hand crypto fintechs are requesting the White House to rule in the favor of a fee-free 1033 regulation.
- Reports are coming out showing that the CFPB may be axed entirely, in this article we break down how the moves made by the government, banks, and fintechs have collectively destabilized progress on 1033.
The 1033 Open Banking regulation hasn’t materialized. In this article we break down the new developments in the space and how fintechs, banks, and the government have all contributed to the lack of progress in regulation.
The back story
The U.S. open banking regulatory landscape has shifted dramatically as the Trump administration’s CFPB retracted the Biden-era Section 1033 rule, calling it unlawful due to concerns about regulatory overreach, the lack of bank fees, data security risks, and unrealistic timelines. While the Biden-era CFPB was staunchly against banks charging fees for sharing data with fintechs, the new CFPB has signalled strongly that it will be formulating these fees into the new regulation. The pivot in direction and communication following the retraction seem to signal that the next formulation of the 1033 will favor traditional banks over fintechs. The change in the CFPB’s attitudes towards the Open Banking regulation is exacerbating the rift between fintech and banks regarding 1033. Fintechs want easy no-fee access to consumer’s data within banks, and banks don’t want to build APIs that would enable data-sharing for free – leading to fintech-focused trade groups accusing banks of anti-competitive behavior. However, the whole landscape surrounding Open Banking is growing less certain by the day, with both banks and fintechs making bold moves to tip the scales in their favor. Open Banking regulation has now become an unstable three-body problem, where banks, fintechs, and the government all have a stake to put in the ground, but to what end is less clear. 