Banks and fintechs in the US will look at best practices for open banking in the rest of the world as market participants doubt the country’s regulators will ever provide a roadmap, although industry bodies are providing direction.
“For North America or the US market, I’m not sure that we’ll ever introduce regulations that impact [open banking],” said Alex Yang, global head of API Strategy & enablement, Bank of America Merrill Lynch, who was speaking at this week’s during Fintech Talents North America.
“However, what we do have are industry groups that attempt to replicate and encourage best practices, industry groups like the Financial Data Exchange, very focused on safely sharing data between data aggregators between financial institutions between the fintechs or bigtechs who may want to make use of that data.”
To better encourage best practices and standardisation, the US Consumer Financial Protection Bureau (CFPB) announced in July it would be looking to solicit stakeholder feedback on data sharing.
If US regulators are to take a hands-off approach in regards to open banking, Yang says banks will need to keep in mind consumer’s well-being
“The concept of open banking is this idea that if there is a service that can be improved by granting access to a third party, banks will still keep in the back of their minds. This is regardless of what the regulations say, regardless of what all the legal agreements say. The bank will ultimately still be responsible for their customer because it’s the right thing to do.”
However, even if the US is to take a different approach to open banking than in Europe or Asia there is still a need for global cooperation on data sharing, says Sam Taussig, head of policy at Kabbage.
“We absolutely need a global standard, whether you’re talking about third party vendor risk management, cybersecurity, resilience, data access, data privacy and etc.
While the importance of a set of standardisations is important for open banking to flourish in North America and globally, Taussig says much of the conversation is dominated by multi-national corporates and that smaller community banks need mechanisms to adhere to any future standards.
“The community banks not only need to be at the table, they’re not going to be able to conform to a standard that’s going to be hard over [implementation]. We need to have an opportunity and a pathway for them to inch up at a reasonable rate.”