The New Ruling Sets The US On The Path Of Open Banking

A recent ruling has decided that consumers in the US will have the right to instruct their banks to transfer their financial data to other institutions in accordance with the banking rules created by the Consumer Financial Protection Bureau.

What Does This Mean For Consumers?

According to the CFPB, the ruling will help users switch to providers that offer superior services and rates. They will also be able to lower prices on loans, and overall improve customer services across credit, payments, and banking markets.

Commenting on the matter, the CFPB Director Rohit Chopra said that too many Americans are stuck in financial products with lousy rates and services. This is why the new rules will be a game-changer, as they will give people more power to get better rates and services on credit cards, bank accounts, and more.

With the new provisions, consumers will also have the ability to access and freely share their data associated with bank accounts, mobile wallets, payment apps, credit cards, and any other financial product. Furthermore, users will be able to access and authorize third parties if they wish to grant them access to their data.

This can include transaction info, account and balance data, information needed to initiate payments, upcoming bill information, basic account verification, and more. What’s more, financial institutions must make all of this information available without charging any extra fees.

What Do The New Rules Mean For Financial Service Providers?

What this means for the third parties is that they will only be able to collect, use, and retain data to deliver the products that the consumer had requested. They won’t be able to keep and use this data secretly for their own business purposes unrelated to the customer and their request, which has proven to be a common issue with financial firms. 

For example, they won’t be able to use consumer data to analyze it and engage in targeted advertising to offer consumers specific loans, and alike. 

According to Chopra, the Personal Financial Data Rights final rule will move the US closer to having a safe, secure, reliable, and competitive open banking system. 

Of course, even though the rules are now in place, compliance will still take time, and it will be implemented in multiple phases. Larger providers will be subject to the rule change sooner than smaller ones, as they are expected to be able to afford it in less time. Meanwhile, financial firms will be expected to comply based on their size. The largest ones will have to become fully compliant by April 1, 2026, while the smaller ones will have a much longer period, with the deadline being April 1, 2030.