While the UK has led the way with 7-day switching, there is no such facility in the US. Indeed, the CFPB describes the US set up as ‘clunky’ when it comes to switching.

CFPB director Rohit Chopra says: “Moving to a new checking account with a better interest rate involves resetting direct deposits and recurring bill-paying, printing new checks, and obtaining a new card device. Mistakes can be costly. It’s no surprise that the largest banks in the country have barely budged on their rates, but still retain their depositor base. Open banking involves less red tape and more seamless switching.”

CFPB finalising proposed data rules to enable open banking

Last year, the CFPB proposed rules that will serve as a key foundation in the shift to open banking. The rules rely on a dormant authority under Section 1033 of the Consumer Financial Protection Act. This gives consumers rights to access their data. The rules also seek to ensure that sensitive personal financial data is safe and private.

Speaking at the Financial Data Exchange Global Summit, Chopra says:“We are in the process of finalising these rules, by reviewing feedback to our proposal, coordinating with our sister components within the Federal Reserve System, and thinking through enforcement with other financial regulators.”

As part of this process, there is growing discussion about how to set relevant industry standards. This includes data standards and sharing protocols.

The CFPB has been learning from other jurisdictions that are ahead of the US in launching open banking. It is trying to understand how strike a balance between regulations being too prescriptive and regulations not being prescriptive enough. Chopra says the latter –can lead to messy or fragmented standards, or prevent standards from sufficiently developing.

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“We know that in some jurisdictions, such as Australia, regulators have gone to great lengths to prescribe detailed technical standards for data sharing in their open banking regimes. However, I’m less confident a similar approach would work in the US.

Anti-competitive behaviour of some incumbents

At the same time, we also know that in other jurisdictions, such as in the EU, regulators took an approach that led to fragmented or conflicting standards. This approach created complications for implementation and undermined interoperability.”

Chopra warns the largest financial institutions will require to embrace open banking.

“We continue to hear reports about incumbents potentially coordinating efforts to limit consumers’ exercise of their rights to access data by forcing data sharing through a bank-owned venture. Anti-competitive behaviour by dominant firms or standard setters is not going to advance open banking. Banks can choose their own service providers to enable open banking, but we will be watching out to make sure that such service providers are not used to an anticompetitive effect.

Some of these anti-competitive tactics may also violate the law. The CFPB is in regular communication with the Department of Justice to flag potential self-dealing schemes that may run afoul of civil and criminal laws. That’s why our proposed rule anticipated the CFPB setting rules around formal recognition of standard-setting organisations. This will prevent large incumbents from rigging standards in their favour.”