Financial technology is transforming how Americans manage their finances, providing access to low-cost, seamless, and responsible financial products and services. Critical to these innovations is “open banking,” consumers’ right to securely control and share their data and financial information.
Open banking functions as the “digital shoebox,” replacing the old print-outs of financial information consumers used to take to their accountants and bankers, allowing consumers to easily and securely connect their bank accounts to apps and services they choose. For the more than eight in ten Americans who rely on fintech, open banking enables them to manage their financial lives with confidence, choice, and convenience.
But in order for consumers to fully benefit from open banking innovation and the promise of open finance in the future, Washington must guarantee their personal financial data rights.
My Money, My Data: Establishing Personal Financial Data Rights
To date, open banking has been market-driven, with the private sector creating the technology for consumers to securely connect their bank accounts to digital apps and services. But, under the current system, consumers are limited by the information their bank is willing to provide. That’s why consumers need the protected right to safely control and connect their financial data to the personalized services they want, like budgeting, payments, investment, money management, and credit tools.
The Consumer Financial Protection Bureau (CFPB) is currently engaged in rulemaking under Section 1033 of the Dodd-Frank Act to guarantee those benefits by establishing a personal financial data right. Advancing Section 1033 has broad industry and bipartisan support. CFPB Director Rohit Chopra has made it a priority, calling for a financial future where consumers can freely switch providers and access the best services for them.
Many consumers are not fully aware of all the fees and charges associated with the financial products and services they use. According to the Wall Street Journal, consumers could have earned $42 billion more in interest with the power to shop around and switch banks more easily. Currently, consumers may not be using the product that best meets their individual needs. In addition, many of these financial services are not accessible to everyone, especially those with lower income or no credit history.
Open banking addresses many of these challenges by fostering competition and innovation in the marketplace. Here are some of the ways open banking helps people spend, save, and manage their money with confidence.
The Open Finance Future: Unleashing a Fuller Picture of My Financial Life
While U.S. regulators are currently focused on enabling open banking, financial services are heading toward a more holistic financial experience beyond just bank account data called open finance. With open finance, consumers could benefit from a 360-degree look at all their financial accounts, including brokerages, retirement funds, and utility payments, so that their experience as a user of financial services matches the full picture of their everyday life. Right now, financial service companies have the infrastructure to support open finance, but regulation needs to catch up to technology’s rapid advancements.
Ultimately, the CFPB’s steps to establish consumers’ clear right to access all their financial data will level the playing field and help more consumers take control of their finances. Looking ahead, these consumer financial data rights could usher in a new era of greater access to products and services, with increased cost transparency, more personalized offerings, and greater access to the financial tools for success.