In October 2024, the Consumer Financial Protection Bureau (CFPB) issued its final ruling on section 1033 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The verdict has been a significant catalyst for open banking, requiring financial institutions to make consumer data available electronically upon request.
While these open banking regulations call for movement to stay compliant, there’s more to it than just checking a box. Open banking is making consumer financial data central, portable, and shareable.
How do businesses unlock innovation within that?
Evolving from open banking basics to opportunity and the fulfilment of potential
Most of us are familiar with Masow’s hierarchy of needs – a psychological theory that organizes human needs into a five-tier pyramid: basic physiological needs (survival), safety (security and stability), love/belonging (relationships and connection), esteem (respect and achievement), and self-actualization (personal growth and fulfillment).
It is commonly accepted that people must first satisfy basic needs like food and safety before progressing to higher needs such as relationships, achievement, and personal growth.
Looking through this “hierarchy of needs” lens can be helpful when it comes to a financial institution’s evolution, too:
Basic open banking needs
At the bottom of this pyramid, there are the basics: the rules you must abide by. In the context of open banking, we have regulations like the final 1033 rule that businesses must adhere to at the very least.
Security and stability
Then, there’s the element of safety. When businesses start opening up their applications, it presents a security risk. This calls for financial-grade API security, something that standards make much easier.
Connection to a larger ecosystem
On top of that, there’s a need for connection. Financial institutions can’t build all the applications they want independently; they need trusted partners to support these efforts.
When you find opportunities to simplify those connections—like eliminating screen scraping—all the better.
Respect and consent
From a respect standpoint, it’s a matter of being mindful of how you manage data on behalf of your customers.
Granular consents should be in place to enable secure access to data, with care to what customers want to share and for how long.
Becoming the best organization you can be
After covering these bases, businesses can start to think about self-actualization.
How can third-party APIs work in conjunction with the APIs you already have? How can you group and productize these APIs to uncover new revenue opportunities?
As an organization, you want your financial services to be their best.
How standards in open banking help build a solid foundation
Just as a person’s journey to self-actualization depends on meeting foundational needs first, financial institutions should rely on a solid, standards-driven base to achieve their potential in open banking.
Standards aligning with open banking regulations offer a better way to achieve these results by addressing compliance, security, and scalability all at once.
The Financial Data Exchange (FDX) is leading the way in providing open banking standards—a conversation Axway is proud to have been a part of for many years. These common API standards make it easier to share financial data without friction, in a secure, transparent manner.
Let’s revisit the topic of screen scraping.
A lot of data exchange happens when a company logs in as a customer and scrapes the page for information about their transactions, accounts, and more.
There are a few issues with this practice:
- Exposing customers’ login credentials to third parties invites security risks
- Consumers are often unaware their data is being collected and shared
- Data integrity may be impacted by changes in website functionality or layout
Dive deeper into screen scraping with this article.
FDX standards establish an API-based framework for data sharing that eliminates the need for screen scraping.
Financial data sharing becomes more secure, and the customer experience improves. Variables like these put you ahead of the game.
Doing the basics continuously to reach the full potential of open banking
The FDX continues to drive the future of open banking by releasing API updates twice a year. These updates relate to consent, recipient registration, fraud, and more.
With FDX standards, businesses are in a continuous compliance mode.
Rather than treating use cases like personal finance management or account owner verification as one-off projects, FDX standards seamlessly support diverse applications through a unified, scalable, and secure ecosystem.
At the end of the day, open banking is all about enabling end users being able to make requests, partners being able to access data from your financial institution, and being able to give that consent.
Consider the technology choices you’re making and if they’re equipped with FDX standards to help cover all these bases.
With the latest FDX standards built into Amplify Open Banking, we’re proud to help reduce the complexity of open banking APIs and make them more widely adopted.
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