January 02, 2024

A New Era for Open Finance

John C. Pitts

Just before the close of 2023, Plaid filed our Dodd-Frank 1033 comment letter, one of the final steps of the years-long 1033 consumer financial data right rulemaking process. On the whole, we are encouraged by the direction of the proposed rule, which includes key provisions that will ensure consumers are guaranteed a right to access and share their data, and innovation is encouraged through dynamic competition.

Plaid was founded over a decade ago on the principle that consumers have a right to their own financial information, and their ability to access and share that data encourages more informed financial choices and opportunities to access a broader set of services. It also inherently encourages competition, which in turn ensures better products and a focus on stronger consumer outcomes. Today, Plaid powers a thriving network of applications and services across a variety of use cases, and has unlocked the ability for thousands of companies to deliver efficiencies and better outcomes for the consumers they serve across lending, payments, anti-fraud and more. One in 3 people in the US have connected to their chosen app or service using Plaid.

Our vantage point across the digital financial ecosystem gives us a unique perspective from which to recommend optimal outcomes for an open finance rule that protects consumers and innovation, while encouraging a safer, privacy-centric ecosystem and minimizing risk of fraud.

We believe the rule is good for consumers and good for industry – including fintechs, banks and everyone in between. Healthy rules of the road will accelerate a push away from legacy technology like screen scraping. Today we have about 75% of our traffic on or committed to APIs and the proposed rule’s requirement that every bank – and some popular fintechs – create and resource API integrations will help achieve our goal of getting to 100% as soon as possible. 

The rule will encourage greater choice, more competition, and redundancy across services like payments.  This will ultimately benefit consumers by driving down costs and will motivate companies to build better products. While the next decade will apply healthy pressure on legacy providers, this is not a zero-sum opportunity. The new reality is that digital finance is simply converging into financial services; most consumers manage at least one aspect of their financial lives online and most providers are building services as digital solutions.

In accordance with our vision for a strong consumer financial data right, our comment letter calls on the CFPB to reiterate the following key themes: 

Establish a comprehensive financial data right: 

Consumers deserve strong financial data rights whether they’re managing their daily finances, paying their mortgage, or investing for the future. We support establishing a holistic, open finance rule so consumers can access and share the data they need to use a wide range of financial services whether they are a customer of a small bank, a large bank, or a neobank.

Effectively promote competition:

Businesses seeking to hold onto their customers should not be allowed to interfere with consumers’ right to access and share their own data with competing services. The CFPB should establish strong transparency requirements as well as protections against anticompetitive practices and ensure rigorous enforcement of its rule.

Require companies to give consumers meaningful control over their data: 

Consumers should be given meaningful control when it comes to accessing and sharing their data, including the ability to understand how it will be shared and to stop sharing their data at any time.

Encourage innovation to create a more inclusive and safe financial system: 

An open finance rule should empower consumers by allowing for secondary uses that benefit them and a healthy, competitive ecosystem – from developing anti-fraud tools, to making more inclusive cash flow underwriting models, to building personalized financial tools, to conducting critical public good research. As the financial system becomes more open, companies need the ability to stay ahead of the curve to ensure the right level of consumer protection. 

Support API implementation:

Plaid has led the industry shift away from screen scraping, with the majority of our traffic now on or committed to APIs. We are pleased to see regulators reaffirm the industry’s adoption of this new technology. At the same time, the open finance rule must ensure the timeline for the transition to APIs is reasonable in order to ensure a smooth transition so that consumers don’t lose access to financial services they rely on.

We are proud to be a part of a thriving community of companies building in financial services and which care deeply about creating more opportunities for consumers. With the 1033 rulemaking expected to be finalized later this year, we will work closely with our partners to align to the forthcoming regulatory framework. We’ll continue to advance the security, transparency, and privacy controls built into our open finance platform to make the transition smooth. By working together, we can ensure that a strong consumer financial data right accelerates the development of more innovative financial services in the decades to come.