The news: President Joe Biden is urging the Consumer Financial Protection Bureau (CFPB) to press forward on rulemaking that would give banking customers the right to port their data from one bank to another.
The push from the White House—it’s part of a broader executive order addressing competition in various industries—encourages the CFPB to continue its current rulemaking effort under the Dodd-Frank Act’’s Section 1033.
How we got here: While the Dodd-Frank Act became law in 2010, the bureau has been slow to implement open banking regulation under it.
In the absence of open-banking regulation under Section 1033, private-sector actors have ventured in to fill the void.
The opportunity: A CFPB-issued open-banking regulation will make it easier for consumers to port their banking data and will simplify the bank-switching process. This could potentially help neobanks to pick off incumbents’ customers and persuade potential users to designate them as their primary banks. Neobanks would then profit from higher value per client and higher deposit totals.
Convenient data movement would benefit challenger and incumbent banks alike by letting them share their data with fintechs. Banking players could then market seamless integration with fintechs as an enhancement to the customer experience to appeal to prospects and deepen existing customer relationships.