Keep Open Finance Open
By John Pitts, Head of Policy
Open finance is based on the principle that consumers should be able to safely and freely move their financial data from one financial services provider to another. It has given rise to an entire fintech industry, and, in doing so, unlocked consumers’ ability to access the best services at the best prices. It serves as the foundation from which thousands of companies, including Plaid’s 8,000+ customer apps, now give consumers more and better ways to manage their money. Whether consumers want to instantly send money to friends, access their wages immediately, create a budget, or secure low-cost financing choices – all of these things are made possible by consumers being able to freely access and share their data.
Consumers benefit from this control over their data. In fact, more than 9 in 10 consumers report that fintech has helped them save time and money and reduce fear and stress around their finances. And, as open finance has allowed more companies to enter the financial services industry and offer new or improved services, the increased competition has benefited consumers by reducing and even eliminating costs like overdraft fees, while fostering more inclusive financial services. Open finance has given consumers more power to choose who they want to do business with.
But not everyone supports the increased competition and innovation made available to consumers through open finance.
Today, any consumer – or company acting on a consumer’s behalf – can connect to their bank directly to access and share their financial data. But recently, certain financial institutions have decided that there should only be one way for consumers to access their data – and that’s through a company that they and a group of other banks own and control. This would give those institutions the power to potentially block use cases or even prevent companies that posed a competitive threat from easily acquiring new customers. It would also put them in a position to increase the cost of doing business for their competitors. This would seriously harm competition and choice. If consumers cannot easily share their data to access new or better services, then they will be stuck using services from their existing providers. That is the very problem that open finance and competition was designed to fix.
We stand against this.
And we’re not the only ones. Recently, the Director of the Consumer Financial Protection Bureau recently noted that, “In consumer finance, powerful firms have sometimes looked to manage emerging technologies through utilities, networks, or standard setting organizations skewed to their interests – or even owned by them.” The Director pledged that the Bureau would “pay close attention to any attempt to limit consumers’ exercise of their data rights” and the Bureau’s upcoming open banking rule is an opportunity for them to do this.
Let’s keep open finance open. We have built secure API-first integrations with thousands of institutions that support innovation and consumer choice. We’re watching the regulatory developments closely and expect to see more public communication from the CFPB in October 2023.