One of the most significant pieces of legislation to emerge from the 2008 financial crisis was the Dodd-Frank Act. Given the scale of the crisis, the fact that it had bipartisan support is a testament to just how serious things were. One of the most impactful outcomes of the Dodd-Frank Act was the creation of the Consumer Financial Protection Bureau (CFPB), and the rules it established have remained resilient, even through changes in government.
Fast forward to today, the CFPB’s proposed 1033 rules bring the U.S. closer than ever to a consumer data right—a world where individuals can control their own data. When finalized, they could reshape the relationship between consumers and the companies that hold their data, potentially forever.
Unlike other countries, where the regulator sets the rules on almost everything (including access to data), the U.S. is likely to keep much of the control in the hands of the banks and service providers. These relationships will remain more “bi-lateral,” meaning the specifics of how your data is shared may still depend on direct agreements between financial institutions and service providers. But the overall aim of the rules are to push major banks to open up access to a wider range of services through common, standardized interfaces.
So what does this mean for the average consumer? We’re looking at a potential evolution in how we bank, make payments, and access credit. It could unlock new ways to pay for goods and services, and give them more control over who has access to their financial data and how it’s used.
But it’s not all sunshine and rainbows—there are real challenges on the horizon for banks. They’ll have to:
- Manage new API infrastructures.
- Handle more third-party relationships than they’ve historically dealt with.
- Meet new reporting requirements that might shift compliance responsibilities from engineering teams to other parts of the organization, covering things like latency and technical compliance.
For consumers, though, the payoff could be huge: more transparency, better services, and greater control over their own financial life.
The initial rulemaking was published last year, and it was expected that final regulations would be implemented by this past spring. However, as of now, we’re anticipating that the final rule will be issued in the coming week, just in time for Money20/20.
However, for the banks and fintech service providers the hard work is really going to start as they work to meet the timelines set by the CFPB for compliance.
Watch this space!
David O’Neill is the COO of APIContext and has been working in the measurement of performance and compliance of banking APIs since the start of Open Banking. He is speaking at Money20/20 on the Panel “Are you ready for Open Banking” at Money 2020 at 9:45 Sunday October 27 2024 in Casanova 501-503.
Connect on LinkedIn or email to setup time to meet.