How to understand and embrace open banking

Session from the November 19-20, 2024 OpenFinity Expo

Video replay and slides available here:

Link to the video replay.

Session Description:

Open banking is finally here in the US. With new regulation comes new compliance obligations - as well as opportunities - for financial institutions.

With financial institutions at varying stages of their digital journey, many need to begin preparing in order to meet expected compliance requirements as well as better meet their consumers’ expectations for digital services. Once the rule is public, banks will need to ensure they are acting within the appropriate amount of time to meet these requirements.

In this presentation, Jordie Cohen from Plaid and Bruce Schilder from Accenture cover what open banking requirements the rule has instituted, what this means for financial institutions and the broader ecosystem, and how financial institutions can take advantage of open banking for themselves, and how they can work across the ecosystem to embrace these changes.

Samples from the presentation

Key Takeaways:

1. Understanding Open Banking and Section 1033: The CFPB’s Section 1033 establishes the groundwork for open banking in the U.S., focusing on consumer-driven, consent-based data sharing. It emphasizes the transition from screen scraping to secure API-driven models, offering consumers greater control over their financial data and fostering interoperability.

   
   

2. Global Comparisons and Market Positioning: Unlike Europe’s PSD2, which catalyzed competition, Section 1033 focuses on standardization and ensuring compliant data sharing. Financial institutions in the U.S. must adapt to these standards to maintain competitiveness, as open banking increasingly becomes a consumer expectation.

   
   

3. Opportunities and Challenges for Financial Institutions: Open banking offers a dual advantage: compliance and the ability to unlock new revenue streams through enhanced customer experiences and innovative solutions. Institutions that embrace APIs and leverage data insights can position themselves as market leaders, while those lagging may struggle to retain consumer trust and market share.

Implications:

1. Adopting APIs for Transformation: Banks and fintechs need to embrace API-driven systems to streamline data sharing, improve security, and meet consumer demand for seamless financial services. This shift also enables better data insights, fostering innovation and creating a competitive edge.

   
   

2. Building Consumer Trust Through Compliance and Experience: Providing secure and valuable experiences will be key to gaining consumer consent for data sharing. Financial institutions must prioritize user-friendly interfaces and robust consent management systems to meet regulatory requirements and enhance customer satisfaction.

   
   

3. Strategic Partnerships and Ecosystem Growth: Collaborations between financial institutions, fintechs, and aggregators will be essential to building a thriving open finance ecosystem. Developing standardized practices and aligning with regulations will create a level playing field, driving growth and innovation across the industry.