Challenges for Banks in Open Banking

Open Banking: A Missed Opportunity for Community Banks? The CFPB’s new open banking rule exempts over 3,300 community banks, sparing them from hefty tech implementation costs. On paper, it looks like a win. But in practice? It’s a slow death. By sitting out open banking, community banks risk being sidelined in the innovation race. Open banking is reshaping global finance—giving consumers control over their financial data and enabling seamless access to modern banking solutions. Europe, Australia, and India are racing ahead, while the U.S. risks creating an uneven playing field for smaller institutions. Here’s the catch: community banks actually have unique strengths. → They’re agile, without the bureaucracy of large banks. → They can build trust-based, hyperlocal solutions. → They could lead in consumer-focused innovation—if given the tools. But without modernization, these banks might lose relevance. The cost of inaction outweighs the cost of adoption. The solution? → Fintech partnerships to share the tech burden. → Government incentives to bring open banking to smaller banks. → Industry collaboration to level the playing field for all. Open banking isn’t just a regulation—it’s the future of financial services. If community banks don’t seize this moment, they’ll watch the future pass them by.

Last week JP Morgan effectively set the idea of standards for Open Banking in the US on 🔥 by setting a price for data access that would make rule 1033 irrelevant. It's their data, they should be able to charge for it, right? WRONG! 🚨 No open banking standards? Here’s what happens: 💥 The biggest banks win by default. They control access to customer data by pricing out competitors, giving their own apps priority, and locking out community banks and fintechs. 💥 Consumers lose. They’re stuck with fewer choices and forced to share their logins in risky, insecure ways—leaving them wide open to fraud and abuse. 💥 Commercial customers aren't far behind; consumer is often the leading edge that pioneers for business innovation to follow. 💥 Community banks get left behind. Without secure, standardized APIs, they can’t deliver the digital experiences their customers expect or compete on a level playing field. This isn’t hypothetical. It’s happening. And it’s exactly why open banking standards are critical: ✅ To protect consumers from data breaches. ✅ To stop the largest players from using their APIs as gatekeepers. ✅ To empower community banks to innovate and compete. No standards = a financial system rigged for largest players. Standards = security, choice, and a future that includes everyone. Which world do you want to live in? This week on Breaking Banks Fintech Podcast, a debate between those for and those against charging for data access and what constraints should be applied.