US’s stop-start open banking journey sees ‘account access’ fees in spotlight

The stop-start journey towards the introduction of an open banking regulatory regime in the US has taken its latest twist, with fintech and banking representative associations locking horns over so-called ‘account access’ fees.

A ‘Personal Financial Data Rights’ rule had been finalised by the Consumer Financial Protection Bureau (CFPB) last October (2024), which looked set to enable the US to start catching up with nations including the UK, which launched an open banking regulatory regime eight years ago. Then-president Joe Biden had signed an executive order more than three years previously (July 2021) directing the CFPB to facilitate the portability of consumer financial transaction data to enable to more easily switch financial institutions and use new fintech products. 

But banking representatives bodies challenged the new rule and the CFPB’s very future has been shrouded in uncertainty since Trump’s White House return in January. In a legal filing in May, the CFPB itself said it would petition a court to have the so-called ‘1033 open banking rule’ rescinded. The Financial Technology Association (FTA)’s president and chief executive Penny Lee said, at the time, that “vacating the 1033 rule is a handout to Wall Street banks, who are trying to limit competition and debank Americans from digital financial services.”

News agency Bloomberg reported last month (July) that JP Morgan was planning to impose fees on fintech companies for access to customers’ bank account data.

In developments over the past week, the FTA has released a ‘public letter’ (13 August), co-signed by more than 80 bosses of fintech companies and other interested organisations, urging Trump to ‘use the full power of your office and the broader Administration to prevent the largest institutions from raising new barriers to financial freedom.’ In a press release accompanying the letter, the association stated that ‘exorbitant consumer data access fees… would prevent consumers from connecting their bank accounts to better financial products of their choice.’

The American Bankers Association (ABA), Bank Policy Institute (BPI) and Consumer Bankers Association (CBA) have responded (14 August), stating that the FTA-led letter ‘seeks to mislead the Trump Administration about open banking’.

OPEN BANKING: EXPLAINED Open banking, and its sibling concept open finance, are being encouraged by governments worldwide, in different ways and at different speeds, as a means of boosting innovation and competition in financial services. ‘Open’ refers to open application programming interfaces (APIs): software intermediaries that allow two machines to interact. Open banking is a reference to users sharing their banking data with third parties.

FTA-led letter’s view

The FTA-led letter’s authors state that ‘economic freedom is under direct threat from the nation’s largest banks.’

‘The progress your Administration has made is being actively threatened as some of the nation’s biggest banks find new ways to deny consumers access to basic financial services,’ they tell Trump, arguing that ‘large banks are taking aggressive action to preserve their market position by imposing exorbitant new “account access” fees that would prevent consumers from connecting their accounts to better financial products of their choice.’

‘This access is critical to ensuring Americans have control of their own financial lives in a digital economy. More fundamentally, they are advancing a dangerous legal interpretation that a consumer’s right to their account information does not include the freedom to share access to a trusted application acting on their behalf,’ they continue.

The FTA-led letter is four pages long (the first page and a half being the main text, with the remainder being the signatories). Signatories include Lee herself, along with American Fintech Council chief executive Phil Goldfeder, Crypto Council for Innovation chief executive Ji Hun Kim, Financial Data and Technology Association (FDTA) executive director Steve Boms, plus the bosses of individual firms such as Klarna, PayPal, Plaid, Remitly and Stripe. The chief executives of the National Association of Convenience Stores and National Grocers Association are among non-fintech specialists to have also signed.

RELATED ARTICLE US moves towards open banking as financial data rights rule finalised – a news story (23 October 2024) on the ‘Personal Financial Data Rights’ rule* (*as was, last year)

Three ‘future-defining fields’

‘If the large banks are successful, it will choke off access to the finances of consumers and businesses, effectively killing competition and crippling American innovation in three critical, future-defining fields,’ the FTA-led letter continues.

The three fields specified are cryptocurrency; artificial intelligence (AI); and digital wallets and payments.

‘America’s ability to lead in the responsible development of digital assets depends on safe, reliable on-ramps connecting our banking system to the new ecosystem,’ the letter states in respect of cryptocurrency. ‘Severing this connection will drive innovation offshore and diminish US influence.’

‘The entire promise of personalized AI to help Americans manage their financial lives hinges on these tools acting as a consumer’s authorized agent,’ it states in respect of AI. ‘The banks’ position would grant them powerful control over the future of financial AI assistants that might help consumers find better deals or manage their lives.’
‘By blocking access, banks will stifle the growth of low-cost, innovative payments, reinforcing reliance on legacy payment networks and increasing costs for the small businesses that are the backbone of our economy,’ the letter states in respect of digital wallets and payments.

Global Government Fintech’s open banking / open finance topic section

White House ‘should act immediately’

‘This is not a dispute over fair pricing; it is an anti-competitive move designed to consolidate power,’ the letter continues. ‘It threatens to cripple innovative products and may cause small businesses and financial tools to shut down entirely.’

‘With these fees set to impact the market in September, the White House should act immediately. Account access fees are not permitted under the law, and if they are allowed to go into effect it will undermine the pro-innovation consensus your Administration is building,’ the CEOs state, adding that ‘account access and data belong to the customer.’

‘This is a defining moment,’ the CEOs conclude. ‘We cannot allow the most powerful, entrenched banks to close the door on a more open and modern financial system. We stand ready to work with you to ensure America continues to lead the world in technology and innovation for the benefit of the American people.’

On 23 July, the FTA also published what was described as a ‘joint trades letter’ to Trump urging him to ‘uphold the Section 1033 open banking rule’. The American Fintech Council, Blockchain Association, Chamber of Progress, Crypto Council for Innovation, Digital Chamber, FDTA, National Association of Convenience Stores, National Restaurant Association and National Retail Federation joined the FTA in sending the two-page letter.

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Banking groups respond

‘The Financial Technology Association teamed up with an interesting mix of data aggregators and fintech companies to issue a letter to the President urging the Administration to undermine free markets and engage in government price fixing,’ the ABA, BPI and CBA state in their 14 August reaction to the 13 August FTA letter.

‘Banks don’t charge consumers fees to access their data, and because of banks’ innovation and investments in secure systems, consumers have access to more financial products and secure services than ever,’ they state in a press release.

They describe the FTA-led letter as ‘another extraordinary example of data aggregators and middlemen trying to mislead the Administration into supporting Biden-era policies for personal profit and the right to free ride off the major investments banks have made in protecting consumers’ data.’

‘The double standard these companies want to perpetuate, where they may charge fees for service while banks are expected to provide the same service to these private companies for free, is absurd,’ they continue.

‘The Administration has taken bold actions to strengthen US competitiveness, enable innovation and protect consumers from bad actors. We look forward to seeing a personal financial data rights rule that comports with the statute, protects consumers and ensures a level playing field to encourage innovation, a process the Consumer Financial Protection Bureau has already begun,’ they add.

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API efforts ‘come at a cost’

They ABA, BPI and CBA go on to present ‘facts’.

These include that Financial Data Exchange, ‘a non-profit [organisation] created [in 2018] through a bank-fintech partnership, has built a secure API linking more than 114 million accounts’; and that ‘banks process billions of requests from large fintech companies every single month… [and] processing these requests comes at a cost.’ 

‘Charging for API access is standard for almost every major company… including companies represented in the FTA letter,’ they continue.

Sixty jurisdictions worldwide have implemented legislation or regulations on open banking, while 16 have passed rules implementing the broader concept of open finance, according to the ‘Global State of Open Banking and Open Finance Report’ produced by the Cambridge Centre for Alternative Finance (CCAF) in the UK last year.

In the UK the nine largest banks and building societies in Britain and Northern Ireland (known as the ‘CMA9’ after the Competition & Markets Authority – the CMA) have been required to fund an organisation called the Open Banking Implementation Entity (OBIE)/Open Banking Limited (OBL).

At an event in London in January, Charlotte Crosswell OBE – a well-known figure among UK fintech leaders who is a former chair and trustee of OBIE/OBL – said that “no-one was particularly popular in open banking teams with the [CMA9] banks” because of the “back-end” technical costs of open banking’s implementation. Her observation had echoes of a point made by a CMA9 bank senior representative at an event in London in October. NatWest’s Stephen Wright described open banking in the UK as having a “good foundation” but questioned whether it could be described as a “success”. Wright criticised the costs. “Open banking, if you add everyone together, probably cost the best part of £2 billion [about $2.6bn] to deliver [in the UK],” he told the audience during a panel discussion at the Open Banking Expo event.