The original deadline for the first major milestone in the US’s open banking rollout (1 April 2026) just came and went, with little fanfare. With attempts at US regulation currently stalled, some US banks may feel grateful for the temporary postponement. But in reality, these banks should continue to dive into open banking and embrace it wholeheartedly – or risk being left behind.
Despite regulatory uncertainty, open banking in the US is still steadily advancing in practice, with all signs pointing to it as the way of the future. While it may be true that only a relatively small slice of US-based financial services institutions – banks, credit unions, fintechs and more – are Financial Data Exchange (FDX)-compliant today, the number of linked U.S. consumer accounts is rapidly expanding.
Additionally, in Canada, the Royal Assent of Bill C-15 was just granted in late March – marking a major step toward open banking for our northern neighbour.
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While many US banks agree with and support the idea of customer-permissioned data sharing, some argue that the CFPB overstepped its authority; and that the rules create data privacy and security risks that are simply too onerous. While there are definitely still critical issues that need addressing – data security and fraud, liability, reciprocal data-sharing between fintechs and banks and more – I believe this position is myopic and imprudent. Delays in regulation will undoubtedly create significant disadvantages for both US banks and consumers over the longer-term. Here’s why:
The customer frustration index
With open banking legislation in the EU well-established, Europe typically sets the bar for digital banking experiences, introducing new capabilities across the entire market at once and creating more consistent user experiences and expectations.
Because many fintech apps operate globally across borders, they raise the expectation bar in the US, with users expecting their own banking apps to be able to do the same things – like personalised financial advice, real-time risk assessment and more. Social media further stokes the flame, with US consumers seeing posts and videos and thinking, “I want my app to do that!”
In the absence of open banking mandates, US banks tend to take a more disjointed approach, rolling out new features as customers demand them. We call this the “frustration index” and it’s always brewing just below the surface. If one bank doesn’t offer a highly sought-after feature, another one will – and with consumer willingness to switch banks reaching record highs in recent years, churn is a huge threat.
Losing fintech appeal
Upon reading the last point, you may be thinking – well, that’s not all bad news – consumers will surely be the ones to benefit from increased competition and choice among banks. But that’s not necessarily true. Over the years, we’ve seen the EU leading the US in many areas of internet regulation – data privacy, platform content moderation, online safety and more. But one area where the US has traditionally held the clear lead is fintech startup innovation and investment.
There are clear signs, however, that leading global players and fintechs may be backing out of the US and putting expansion plans on hold to prioritise other regions more conducive to open banking. Consider UK-based neobank Monzo, which entered the US market in 2019, but recently exited. While the company positioned the move as a strategic refocus on Europe, analysts widely noted that the unclear US regulatory environment — especially compared with Europe’s established open banking framework — made scaling much more difficult.
If fintechs continue to be turned away by the idea of complex, costly integrations with the US-based banks, more global fintechs will almost certainly follow the Monzo example, ultimately limiting innovation and choice for U.S. consumers. For their part, US banks may find themselves with fewer options to extend their feature-sets and services quickly and easily – and fewer opportunities to differentiate in a crowded market.
Continued reliance on risky techniques like screen-scraping
FDX-compliant banks rely on more secure APIs for data sharing, but those that aren’t in compliance often continue to rely on outdated techniques like screen-scraping to share data with third-party fintechs. These same banks claim that data sharing through an open banking model is too risky – but in reality, screen-scraping raises equally if not more serious security concerns, requiring users to share sensitive log-in credentials which can lead to hacking risks.
I understand and appreciate why some US banks may be opposed to the idea of open banking mandates. But ultimately, I believe this is a myopic viewpoint that could hurt both the overall US banking industry, and its users in the coming years. While a phased approach accommodates banks’ varying tech capabilities – and enables banks to spread costs over time – a commitment to compatible APIs is an important first step that all players should be taking now.
As users continue seeking the newest features and services, compatible APIs enable banks to avoid complex integrations or build functionality in-house. Rather, they can simply launch new services as part of their in-app experience, quickly, securely and seamlessly. Ultimately, this will help the US-based banks build app primacy, while also delivering a digital banking experience on equal footing with the rest of the world.
Kranti Talluri, VP of Developer Experience, Candescent
