Experts are assessing the effects of the Personal Data Right rule on consumers, competition and innovation following the Consumer Financial Protection Bureau’s announcement of the finalized rule.
Oct. 22 “is the day the banking industry catches up to every other industry, where consumers own their data,” Matt Denham, co-founder and head of product and payments at fintech Prizeout, told Bank Automation News.
According to the CFPB, the final ruling, released Oct. 22, allows consumers to:
- Transfer their bank data to another bank for free;
- Compare rates on financial services and products; and
- Use open banking for secure payments.
Other open banking use cases include cash flow underwriting, financial management, payment reconciliation, income verification and more.
“Too many Americans are stuck in financial products with lousy rates and service,” CFPB Director Rohit Chopra said in the release. “Today’s action will give people more power to get better rates and service on bank accounts, credit cards and more.”
Financial institutions have the following compliance deadlines:
- Larger FIs, with at least $250 billion in total assets, must comply by April 1, 2026; and
- Smaller FIs, with at least $10 billion in total assets, must comply by April 1, 2030.
Closing competition gap
The ruling brings flexibility to consumers and offers the ability for customers to change financial products or institutions without losing their data profiles, Denham said.
By allowing seamless switching to a new institution, open banking will create competition among “credit unions, neobanks and banks,” Denham said.
In the past, for example, credit unions could offer competitive rates but may not have had the brand awareness to acquire members from larger FIs, Denham said. Now, with data-driven marketing strategies, credit unions can target different clientele.
Driving innovation
As competition ramps up, larger FIs are likely to lean on innovation to retain clients, Nova Credit co-founder and Chief Executive Misha Esipov told BAN.
“If you are a bank leader, a risk leader, you need to have, at the very least, a strong opinion on how open banking can be used to grow your business,” he said.
Prizeout’s Denham echoed this sentiment. Larger FIs will be wondering “How can I create a great service that makes people not want to move?” he said.
This will likely lead to product innovation in order to retain and grow client bases, Denham said.
According to Plaid’s Global Head of Policy John Pitts, this competitive landscape “will help create an environment where financial companies can compete to deliver the best products and services and consumers are in the driver’s seat when it comes to managing their financial information.”
Regulatory push-back
While the ruling has potential to spark innovation at financial institutions, it’s already seeing some push back from banking groups including the Bank Policy Institute and Kentucky Bankers Association.
“BPI supports a competitive marketplace where consumers control how their personal financial data is used and with whom it is shared, so long as their data remains protected, BPI President and CEO Greg Baer said in a BPI release.
Kentucky Bankers Association and BPI argue the ruling does not require oversight of third-party use of customer data which could increase fraudulent activity and allows for screen scraping to continue.
“We are challenging the CFPB to ensure that banks can continue to protect their consumers and the integrity of the financial system in a safe and sound manner,” Ballard Cassady, Jr., CEO and president of the Kentucky Bankers Association.
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