Section 1033 and The Next Phase of Open Banking in the US

The CFPB's proposals for Section 1033 mark the beginning of a new era for open banking in the US. Assuming the proposals that are published in October are in line with current expectations, an ecosystem that has developed entirely on commercial grounds to date will be further strengthened by a dedicated regulatory foundation.

Open banking in the US has been driven by market-based initiatives under existing regulation rather than through modern, centralized regulatory initiatives that are common in many other countries. This situation is about to change with the open banking rule by the Consumer Financial Protection Bureau (CFPB), some of which became effective on July 11, 2024 and the remainder scheduled for finalization during the fourth quarter of 2024. Market-based and regulatory-driven open banking are about to meet head-on. This promises to ignite new consumer data rights, financial institution opportunities, and a fast and furious transition period during which better banking experiences will accelerate as financial institutions, data aggregators, and regulators work to fill the gaps in processes, systems, and responsibilities in the new system.

Although the United States has its own form of open banking based on existing laws and regulations it has begun to catch up with other countries in terms of modern regulation that provides stronger consumer data privacy protection and permission-based access to financial institutions to support banking ecommerce. Celent's analysis of the current state of open banking regulations in the US and Section 1033 of the Dodd-Frank Act will show what financial institutions and the fintech provider ecosystem need to do to not only comply with but also benefit from this new regulation. Celent believes that implementation of Section 1033 will provide a more consistent, clearer, secure, and customer-focused data management framework for opening banking in the US.

In this analysis of the present and future of open banking regulations in the US, Celent examines section 1033 of the Dodd-Frank Act; compares open banking development in the US with other countries; identifies the opportunities that financial institutions, data furnishers, and aggregators have; and provides Celent’s outlook for how open banking in the US will become more consistent, clearer, and more customer-focused.