Global: CFPB Seeks Consumer and Small Business Input on Open Banking Standards

The Consumer Financial Protection Bureau (CFPB) has initiated a process to establish data sharing and technical standards for open banking, inviting a wide range of stakeholders to contribute.

In an announcement on Wednesday (June 5), the CFPB outlined its approach to creating these standards, emphasizing that federal regulations with highly detailed technical requirements risk becoming outdated quickly. Instead, the agency suggested that industry-led standard-setting could more effectively adapt to market and technological changes.

The CFPB emphasized the inclusivity of the process, stating, “The process must be open to all interested parties, including public interest groups, app developers, and a broad range of financial firms with a stake in open banking.”

The standards-setting process will be dynamic, with the CFPB retaining the authority to revoke the recognition of standard setters. Recognized standard setters will have a maximum recognition duration of five years, after which they must apply for re-recognition.

To ensure inclusivity, the CFPB has explicitly included “data recipients” as interested parties in the final rule, responding to concerns that certain financial technology sectors might otherwise be excluded. This inclusion aims to prevent reliance on intermediaries and promote direct data exchanges between providers and recipients.

46% of consumers are willing to use open banking payments for at least one product or service, although trust in data use and protection remains a concern. The data shows 29% of respondents trust their primary bank or credit union the most, with PayPal being the most trusted FinTech for 13% of respondents.

The CFPB’s rule aims to mitigate undue influence from banks, referencing concerns about bank dominance in other countries’ standard-setting bodies. The rule ensures that recognized standard setters can include interest groups specializing in consumer protection, financial services, community development, fair lending, civil rights, authorized third parties, data providers, data recipients, and data aggregators.

For small businesses, the CFPB’s rule emphasizes balanced representation, stating, “Balance would include meaningful representation of small and large commercial entities.”

This inclusive approach aims to create a robust and adaptable framework for open banking that addresses the needs and concerns of all stakeholders, ensuring secure and efficient data sharing in the financial sector.