Navigating the Future of Finance: Open Banking, Section 1033, and the American Market
If you ever wanted to get up to speed with open banking and regulation in the U.S., this is the webinar for you. DXC and Connect Global Group recently hosted a webinar discussing the critical shifts happening in U.S. open banking, focusing on Section 1033 of the Dodd-Frank Act. The expert panel, featuring Sheri Bogardus (KeyBank), Deepmala Khubchandani (Truist Financial), Lewis Poe (Caspian One Open Data), and Duncan Alexander (DXC Technology), explored the regulatory landscape, international lessons, and the future of consumer-driven data sharing.
Here are some key highlights:
The Genesis of Open Banking
Lewis Poe kicked off the discussion by tracing the roots of open banking back to 2017 in the UK, coinciding with the PSD2 regulations in Europe. The Competition Markets Authority (CMA) in the UK sought to break the dominance of the nine largest banks, aiming to foster competition and empower consumers. This initiative has since evolved into a global movement, with most G7 countries adopting open banking regulations.
"At the heart of it, the drivers were around boosting competition, breaking monopolies, and giving consumers control over their data. Open banking facilitates secure digital data sharing between financial institutions and third-party providers, enhancing financial health monitoring and inclusivity while reducing fraud.”
Lewis Poe, CTO - Caspian One Open Data
Section 1033 and the US Landscape:
Duncan Alexander highlighted the parallels between the intentions of open banking and Section 1033 of the Dodd-Frank Act, which focuses on consumer rights to access financial information. The CFPB's final ruling in October 2024 mandates that financial institutions make consumer data accessible, with compliance deadlines varying based on asset size.
Large Institutions (over $250 billion in assets): Compliance by April 2026.
Medium Institutions ($10 to $250 billion): Compliance by April 2027.
Smaller Institutions: Compliance between 2028 and 2030.
However, potential changes under the Trump administration could lead to delays or modifications, including a move towards state-level decentralization.
Navigating the Fuzzy Pre-Regulatory Environment:
With over 100 million US consumers already authorizing third-party access to their financial data, the market is moving forward regardless of regulatory uncertainties. Sheri Bogardus emphasized that "the data is the customers, it's not the banks." KeyBank, like many others, has been on this journey for years, recognizing the importance of data guardianship and secure partnerships.
"We've very carefully selected partners that we trust, that have found the balance between customer ownership of the data, but our need to protect that from point A to potentially point Z as it's passed through the chain."
Sheri Bogardus, VP, Strategic Product Lead - KeyBank
Data Security:
Lewis discussed trust frameworks, which facilitate direct connectivity between financial institutions and fintech's, ensuring secure data sharing through protocols like the Financial Grade API (FAPI). These frameworks enable registration, permission management, and security credential exchange, fostering multiple ecosystems.
Fintech Agility and Cross-Pollination:
Sheri highlighted the agility of challenger banks and the benefits of cross-pollination between traditional and fintech organizations. This learning environment allows for faster adaptation and customer-centric solutions.
Lessons from International Markets:
The panel discussed valuable lessons from international open banking frameworks. Lewis pointed out the importance of understanding the dual roles of data providers and data recipients. He also highlighted the rise of digital challengers like Monzo in the UK, which have captured significant market share by meeting the needs of digital-savvy consumers.
Deepmala emphasized the need for a regulated framework, consistent consent mechanisms, data protection, and standardization. "We have so many lessons that we can learn from across different continents," Deepmala stated.
“The US is still in the early stages of open banking and can learn from the maturity of other markets. The importance of balancing regulatory requirements with customer needs is key. Keeping the customer in the middle of all of this is critical,"
Deepmala Khubchandani, SVP, Enterprise Payments & Commerce Portfolio Management - Truist Financial
Challenges and Opportunities:
The primary challenges and opportunities for banks lie in transitioning to a consumer-direct data-sharing model. Deepmala highlighted the need for customer-centric solutions and addressing the American consumer's love for aggregation. Lewis emphasized the importance of point-to-point connectivity and the potential for commercial APIs. Sheri reiterated the need for data security and customer trust.
Ready to learn more? Watch the full webinar recording here:
