CFPB to Consult Consumers and Small Businesses on Open Banking Standards

Consumer Financial Protection Bureau

In the move to solidify the framework for open banking, the field for just who will help set the standards is wide open.

News came Wednesday (June 5) that the Consumer Financial Protection Bureau (CFPB) has set in motion what it terms a “process” for setting data sharing and technical standards.

Regarding those technical standards, the agency said, “federal regulations with very granular technical requirements could rapidly become obsolete, while industry-led standard-setting would be better able to keep pace with changes in the market and technology.”

And as part of the announcement, the CFPB said, “The process must be open to all interested parties, including public interest groups, app developers, and a broad range of financial firms with a stake in open banking.”

Shifting Membership of Standard Setters?

We’d add that that the roster of standard setters themselves may change over time:  The rule includes a mechanism for the CFPB to, per the announcement, “revoke the recognition of standard setters and a maximum recognition duration of five years, after which recognized standard setters will have to apply for re-recognition.”

Digging into the rule itself, the CFPB details that “in response to commenter concern that certain financial technology sectors might be excluded if not explicitly mentioned, the CFPB has added explicit reference to ‘data recipients’ as an interested party in this final rule. The inclusion of data recipients also helps ensure that data providers and recipients are not forever compelled to rely on intermediaries,” as the advancement of open banking standards continues.

The CFPB’s June announcement comes as PYMNTS Intelligence has found that 46% of consumers are highly willing to use open banking payments for at least one product or service. Trust still remains an issue in terms of data use and protection. The data show 29% of respondents name a bank or credit union as their most trusted provider, most indicating their primary bank, at 19%. PayPal ranks as the most trusted FinTech at 13% of respondents.

Beyond the Banks

The mentions of banks themselves are infrequent in the text of the rule, as the CFPB noted that in considering commentary during the rule-making process, “one commenter highlighted what it described as the undue influence of banks in another country’s standard setting body due to the other country’s exclusion of financial technology voices in the standard setting body.” In other words, banks held undue sway in that unnamed country.

Specific mention is made in the rule that the recognition of certain standard setters can include interest groups with expertise in consumer protection, financial services, community development, fair lending, and civil rights; authorized third parties; data providers; data recipients and data aggregators.

As for smaller businesses, the CFPB’s rule states that “balance would include meaningful representation of small and large commercial entities.”