Biden calls on CFPB to move forward with data sharing regulations
- The White House has called on the Consumer Financial Protection Bureau (CFPB) to move forward with regulating data sharing.
- Its adoption would make it easier for neobanks to become the main banks for clients and would help all banking players to partner with fintechs.
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President Joe Biden is urge the Consumer Financial Protection Bureau (CFPB) to advance the development of rules that would give bank customers the right to transfer their data from one bank to another.
The White House push, which is part of a larger executive decree addressing competition in various industries, encourages the CFPB to continue its current action regulatory effort under section 1033 of the Dodd-Frank Act.
While the Dodd-Frank law became law in 2010, the office was slow to implement open banking regulation.
- The office only laid the groundwork in 2016 and 2017, when it requested an information request and produced a policy statement, respectively. The regulator then tenuous a symposium for industry players in February 2020.
- In October 2020, the CFPB Posted advance notice of the proposed regulations and asked for comments on the process until February. The office has included data sharing in its latest rule-making program, although it has not yet issued a rule proposal.
In the absence of open banking regulations under Article 1033, private sector actors have ventured into to fill the void.
- Important examples include the API provider Plaid-he raised $ 425 million in April with a valuation of $ 13.4 billion – and Akoya, which has 11 banks as investors and more recently added one of them, Wells Fargo, to its data sharing network.
- In addition, a large group of leading US and Canadian financial institutions have also come together to form the Financial Data Exchange (FDX), which is while searching adoption of an industry-wide API technical standard.
An open bank settlement issued by the CFPB will make it easier for consumers to transfer their bank details and simplify the process of changing banks. It could potentially help
select clients of incumbents and persuade potential users to designate them as their primary banks. Neobanks would then benefit from higher value per customer and higher deposit totals.
Convenient data transfer would benefit both challenger banks and incumbent banks by allowing them to share their data with fintechs. Banking players could then market a seamless integration with fintechs as an improvement in the customer experience to attract prospects and deepen existing customer relationships.
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