Opening Banking May Be Getting Closer to Reality

Regulators, consumers and fintech leaders are putting increased pressure on financial institutions to share consumer data. 

I’ve posted before about how demand for faster, easier and more cost-effective banking interactions is driving the financial services industry into new frontiers. Now, a new industry group looks to be turning up the volume on the conversation around open banking and the pursuit of those faster, easier, cost-effective interactions. 

The Consumer Financial Data Rights group, made up of several fintech names like Affirm, Digit, Kabbage, Betterment and others, is focused on an agenda of sharing consumer financial data via open application program interfaces (APIs). The Consumer Financial Protection Bureau came out in favor of data sharing between banks and fintech companies last year. It was a statement that left fintech leaders feeling optimistic while raising concerns in the banking community about how to balance consumer demand for information with rigorous security practices. 

For nearly 15 years, financial institution (FI) leaders have been circling around the issue of fintech data sharing, sometimes referred to as “screen-scraping,” without a resolution. Banking security professionals have been understandably pushing back against data sharing. That’s because it’s an ongoing challenge to determine whether an electronic data request is coming from an app authorized by the consumer or something more nefarious. 

As consumers continue to use a variety of mobile and automated tools to manage their financial lives, the demand for data sharing and interoperability between FIs and fintech developers will grow. European regulators are already making the push for open API frameworks to encourage healthy competition and consumer empowerment. Fintech developers are increasingly positioning their products as ones that help consumers spot spending and budgeting concerns before their FIs do. Until FIs can offer up the same level of insights on their own platforms, a more open approach to banking may continue to be attractive to regulators and consumers alike.