The Consumer Financial Protection Bureau (CFPB) has made significant strides to promote open banking in the U.S. by finalizing a rule aimed at recognizing data-sharing standards and preventing established institutions from undermining startups.
In October, the CFPB proposed its long-anticipated open banking rule, which seeks to enhance competition within the U.S. banking and payments sector. This regulation requires consumer financial service providers to share data at the user’s request with other participants in the ecosystem.
The bureau has stated that industry stakeholders and consumer groups will play a crucial role in establishing the technical standards. The newly finalized rule details the criteria for becoming a recognized industry standard-setting body.
Amid concerns regarding potential dominance by larger banks, the CFPB emphasized that it will “not recognize any standard-setting organization that is rigged in favor of any set of industry players.” The agency further clarified that the process must be accessible to all interested parties, including public interest groups, app developers, and a diverse range of financial firms invested in open banking.
Standard-setting organizations will be required to demonstrate transparency, balanced decision-making, and adherence to due process and appeals.
Additionally, the rule provides a comprehensive guide for how standard setters can apply for recognition, outlining the CFPB’s evaluation process and initiating the opportunity for organizations to seek formal acknowledgment.