Skip to content
CCG Insights

Research Snapshot

  • Research Snapshot

US Banks Continue To Resist True Open Banking

US Banks Continue To Resist True Open Banking

US Banks Continue To Resist True Open Banking

June 30, 2022

By: Kate Drew

Subscribe

Request for Proposal

By: Kate Drew

Subscribe

Request

Open Banking and Strategy

As the US creeps closer to formal open banking rules, many banking institutions in the country are still resisting the concept in its true form. In fact, according to CCG Catalyst’s 2022 US Banking Study, just about a third of C-level executive respondents from US banks said their organization was committed to providing open data access to third parties, aligning with the definition laid out in other jurisdictions by regulation like the Second Payment Services Directive (PSD2) in Europe. That’s about the same as in last year’s sample. Encouragingly, 47% said they were interested in working with select third-party partners, which is up from 37% in 2021, while those dependent on their core provider to define their open banking strategy dropped from 22% to 15%. However, while it’s certainly positive that banks are moving to own their strategies on the open banking front, this activity is somewhat muted by the fact that it’s missing the mark on the open data conversation, indicating that we are still a long way from widespread industry understanding of what open banking is and what it means to implement it.

To be fair, it seems that our country’s regulators are grappling with similar hurdles. In early May, word broke that the Consumer Financial Protection Bureau (CFPB) was struggling to draft an open banking directive because of privacy concerns, specifically around how to protect customer data and govern how it’s used by companies it is shared with. While arguably admirable, this also somewhat evades the point — the key tenet behind open banking is that customers are in control of their data, and they are able to share it freely as they wish. Of course, this must be done securely, but other jurisdictions have provided blueprints for that. In Europe, for example, third-party providers that want to participate in open banking are required to get licensed. They are also required to use your data as agreed to at the point of consent. It’s likely that, as it further explores and understands the possibilities, the CFPB will use similar levers to develop its own framework. To this end, the agency later in May announced the launch of the Office of Competition and Innovation, which is expected to dive into the particulars of these issues, but this will take time.

The bottom line is we’ve been talking about open banking the US for a long time but thus far have made very little progress in implementing anything that resembles the schemes achieved elsewhere. And it seems as though we still have quite a long way to go. It will take mental leaps on the part of many different actors, from banks to regulators, and eventually, to consumers (who will require outreach and education around open banking) in order for any of this to become a reality. In the meantime, we are left with a patchwork effort, as is borne out in the data, by which we are all using different definitions for a single concept. Importantly, getting to open banking in the true sense is critical not only for competition, but ironically, also for privacy and security reasons. Sharing data via standardized application programming interfaces (APIs) is far more secure than the screen-scrapping that’s happening today when consumers want to use third-party apps, which requires users to share their actual login credentials. Like most things, though, this all comes down to understanding and fear of the unknown. In the US, we’ve not yet got a good enough grasp on open banking to embrace the benefits. Over time, that will likely change, but it’s going to take a real willingness to learn and keep an open mind, on all our parts.

You Might Like These, Too

Synthetic Identity Fraud — A Growing Concern Among Financial Institutions

Synthetic Identity Fraud — A Growing Concern Among Financial Institutions

It Was a Challenging Week for Fintech Challengers

It Was a Challenging Week for Fintech Challengers

Fintech Is Vital to the Future of Banking, Regulators Agree

Fintech Is Vital to the Future of Banking, Regulators Agree

Internal vs External Innovation & Why You Should Be Implementing Both

Internal vs External Innovation & Why You Should Be Implementing Both

Leaders in Bank Consulting

About CCG Catalyst
Latest Insights
CCG

PHOENIX • NEW YORK • LONDON • SINGAPORE

Phone: +1-480-744-2240  • Contact Us

© 2023 CCG CATALYST CONSULTING. Privacy Policy & Terms of Service.
Request a Call Back
Linkedin Twitter
Subscribe
to our Insights
Subscribe
We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “Accept All”, you consent to the use of ALL the cookies. However, you may visit "Cookie Settings" to provide a controlled consent.
Cookie SettingsAccept All
Privacy & Cookies Policy

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
Non-necessary
Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.
SAVE & ACCEPT
BANK
FINTECH
FUSION
  • About
  • Services
  • Insights
  • Fintech
  • Research
  • Team
  • Contact
  • Press
  • Careers
  • Events
  • RFI / RFP
  • Terms
  • Privacy
Linkedin Twitter Search
Subscribe for Insights

CCG INSIGHTS FOR BANKS, FINTECHS, AND CREDIT UNIONS

The Fed, Real-Time Payments, Alexa and Apple P2P, Part of Payment Revolution
  • Weekly digest of what's new
  • New research snapshots
  • Exclusive access to banking and fintech research
  • Industry news
  • Invitations to webinars and webcasts