CFPB 1033 charts the future of open banking
Q: What are some examples of best practices for financial institutions to adopt and comply with the rules?
Funari: At the very initial evaluation, you need to make sure that you understand the rule, what it states and the data that it covers. The first step is looking at the data element from that level of the store, saving where this information would be coming from and bringing that sort of organization and compiling.
In addition, we need to look at all of the existing controls and risk frameworks within those entities to understand: Does this rule fit nicely within the existing framework? If not, what changes would need to be made? It’s really about examining your data and the architecture in which those data points move and then really understanding your existing risk management framework.
Carpenter: If you’re a bank, you have to adopt an opportunity mindset and incorporate compliance into that. If you just adopt a compliance mindset, you’ll miss the opportunity to think about how you can leverage open banking, how you can use it to better serve your customers, create more efficiency and how you can actually become a data recipient yourself.
“Mastercard’s view on open banking is that consumers and small businesses own their data. They should control their data and benefit from its use; our job is to protect it,” Tom Carpenter, Mastercard.
Q: How can organizations position CFPB 1033 as an enhancement to the customer experience?
Carpenter: One specific example is digital account opening. Instead of that new customer filling out endless forms online and calling that digital account opening, you think about the ability to share data and pre-populate all those fields and get it directly from another financial institution. You’ve short-circuited what many financial institutions have long wanted, which is a fully digitized digital account opening process. If you think about how fintech, some of these third parties emerged, they largely emerged because you didn’t have a way to manage and see your finances within your banking ecosystem, a way to budget and an understanding of exactly how you are spending your money.
Lending products may not have totally considered cash flow underwriting to enhance credit products. Suppose you think about how you might embed some of that in your own ecosystem and utilize open banking to do it, things like direct deposit switching, capturing recurring bill payments and driving loyalty through some subscriptions. In that case, there are many different ways to think about open banking, such as enhancing the service you provide to existing customers, attracting new customers and building on your brand.
Q: How should financial institutions approach working with service providers to implement CFPB 1033 and open banking?
Feinberg: Banks will have to carry with them this baggage, which is the banking agency’s perspective on how banks integrate with service providers. It’s designed to protect banks and achieves that in many respects, but it’s a lot of work.
Banks will do a couple of things. One, they’re going to have to do their diligence and pick good service providers to work with. I think we’re probably in this webinar with a couple of them right now. And they’ll also have to think about the functionality they get. There’s an opportunity here to show your customers that you care about them and that you make their lives easier and better.