Open Banking is a regulatory framework that allows consumers and businesses to share banking and transaction data safely and securely with authorized third parties. By creating a method for safe and secure access to information, Open Banking allows for the development of new and useful financial services and products for the benefit of consumers and businesses.
How is North America making headway on executing this regulatory framework? In this edition of Trustly Regulatory Services, we catch you up on the progress made so far in the U.S. and Canada.
Towards the end of the Obama administration and under the Trump White House, the Consumer Financial Protection Bureau (CFPB) solicited public comment on how to implement Section 1033 of the Dodd-Frank Act. Section 1033 governs consumer access to financial information and has broad implications for the future of Open Banking, including determining the breadth of data that financial institutions’ consumers have the right to share with third parties.
The CFPB released a Notice of Proposed Rulemaking in November 2020. In January 2022, it published a semi-annual regulatory agenda stating that it will be employing new rules under Section 1033 of the Dodd-Frank Act that will “address the availability of consumer financial account data in electronic form.” The CFPB believes these new initiatives “can lead to competitive, consumer-friendly markets, while recognizing the importance of ensuring the safety and security of consumer account data.” In June 2022, the CFPB also published a spring rulemaking agenda, which sets forth the rules that the CFPB expects to put in place before May 31, 2023, including the 1033 rule.
Currently, the CFPB is convening its small-business review panels – which is part of the rulemaking process under the Small Business Regulatory Enforcement Fairness Act (SBREFA) – and has promised to share a near-final 1033 rule. According to the Unified Agenda, the SBREFA Outline will be published this November.
While the CFPB moved forward on 1033, the Canadian government also made efforts to implement an Open Banking system. In 2018, the government appointed an Advisory Committee (the “Committee”) to guide the review on how to implement Open Banking.
In early 2020, the Department of Finance released a report on the initial findings from the Committee. The report included the results of stakeholder consultations and learnings from other jurisdictions. It also proposed that industry and government collaborate to develop a framework that would enable the safe introduction of Open Banking in Canada. The Committee sought additional stakeholder comments at the end of 2020 and delivered its findings in a final report to the Minister of Finance in April 2021. It provided recommendations on implementing a secure Open Banking framework by January 2023.
In March 2022, the government appointed Abraham Tachjian to lead the development of Open Banking. Throughout the summer of 2022, several working groups will be underway to discuss accreditation, privacy, liability and security.
The coming year will be big for Open Banking in North America and, although the progress has been slow, it’s better to implement it correctly – rather than quickly.
Today, traditional banks have access to everything a consumer does with their money. This includes anything from mortgage payments, entertainment, utility bills, transportation, and coffee spending – yet the banks hardly use it. Open Banking enables this valuable information to be shared with third parties, who can then utilize it to develop new products. It is a means of making data sharing easier.
Open Banking will provide consumers throughout North America with greater financial freedom and increased data control. Moreover, it will help foster innovation for new products and services in a safe, controlled and regulated environment.
Interested in what Open Banking can do for you? Learn more with Trustly, one of the leading voices in Open Banking today.