Will the United States also win the open bank? Will launch PSD2 to create a 23 billion pound financial services market.

The US Consumer Financial Protection Bureau promotes open banking, and the banking industry rebounds strongly

The US Consumer Financial Protection Bureau (CFPB) officially launched the US version of Payment Services Directive 2 (PSD2) in October 2024 through the "1033 clause", requiring Financial Institutions to allow consumers to access and transfer their financial data for free, including information on checking accounts, savings accounts, credit cards, prepaid cards, electronic wallets, and other payment tools. This move will create up to $23 billion in business opportunities for the US open banking market. The announcement of this new regulation traces back to the Dodd-Frank Act in 2010, which aims to curb improper risk-taking by banks and strengthen consumer rights protection. The establishment of the CFPB is precisely to counter the anti-competitive behavior of the banking industry, and the introduction of the 1033 clause symbolizes a step towards a more open and competitive direction for US financial regulation.

The EU experience sets the benchmark for the United States, and open banking innovation has already reached a significant scale.

As early as 2018, the European Union adopted the revised Payment Services Directive (PSD2), which established a legal and regulatory framework for Financial Institutions to share customer data through Application Programming Interfaces (APIs), laying the foundation for innovation in Financial Services.

Currently, Europe accounts for 46% of global banking API products and leads the open banking industry. In contrast, the United States lags behind in developing a secure, regulated, competitive data sharing environment.

Source: Platformable Europe accounts for 46% of the global banking API market and leads the open banking industry.

However, as the largest and most innovative market globally, the United States is expected to change this situation soon. Data shows that American consumers on average use 3 to 4 financial technology applications and 5 bank accounts, reflecting a huge demand in the market for open banking services. Although the United States is unlikely to adopt the strict general data protection regulation (GDPR) like the European Union, the experience of PSD2 in Europe has proven that, under the appropriate regulatory framework, financial data can be securely shared to promote market competition.

The banking industry has raised questions, but the trend of open banking is unstoppable.

The banking industry strongly opposes the implementation of Section 1033 and has quickly filed a lawsuit accusing the CFPB of overreaching. They have raised a series of concerns, including data security concerns, lack of data usage visibility, increased fraud risks, and unreasonable execution schedules.

Especially in terms of the vesting of customer data responsibilities, if data is abused by a third party, the legal responsibility still falls on the bank, which indeed constitutes a huge potential risk. However, in today's free society, consumers' autonomy over personal data has become an irreversible trend, and the highly concentrated and profitable banking industry finds it difficult to maintain data barriers.

Source: Forbes. Banks charge CFPB.

Future prospects of the open banking ecosystem

The financial industry is undergoing a major transformation, and the key to success lies in finding a balance between openness and security. Experts point out that the real winners will be those who can simultaneously address the technical security and legal liability issues of risk managers. They not only need to ensure the technical security of data sharing, but also establish a sound legal framework to handle the transfer of responsibilities between banks and third-party service providers.

As business historian Leon Megginson said in 1963, "The species that survive in the midst of change are not the strongest or the most intelligent, but the most adaptable."

This statement is more appropriate than ever in the current development of open banking in the United States. With the implementation of Section 1033, the U.S. financial industry is at a crossroads of change. How to establish a secure and constructive open banking ecosystem that not only adapts to the trend of cultural change but also safeguards consumer rights will be an important issue for future development.

The United States will also win the open banking? Launch PSD2 to create a 23 billion pound Financial Service market. This article was first published in the 'encryption city'.