Open Banking is thriving in North America as Open Finance

Wednesday 11 January 2023 12:00 CET | Editor: Vlad Macovei | Interview

Don Cardinal, Managing Director at FDX, displays the progress made by Open Banking in the US, how it managed to develop into Open Finance, and more.


Don Cardinal, Managing Director at FDX, displays the progress made by Open Banking in the US, how it managed to develop into Open Finance, and more.


What is the status of Open Banking in the US? Who oversees this initiative? What are the key elements of Open Banking’s US expansion?

Open Banking (more accurately, Open Finance) is thriving in the US. As of April 2022, there were 32 million consumers who have converted from credential-based (ID and password) access to the more secure, tokenized API access. As of version 5.1, there are over 660 data elements defined in the FDX specification. Market forces are the driver in this ecosystem. Serving the consumer – and doing so in a secure, permissioned, efficient manner – is the goal. Satisfied customers are the priority. Over 220 companies in the ecosystem have come together to form the non-profit technical standards body known as Financial Data Exchange (FDX). Having common, interoperable standards is key to ‘letting a thousand flowers bloom.’ A common, no-cost lingua franca available to all stakeholders allows for more, better-quality connections. Common security stack, common taxonomy, common data definitions – all certified – are the foundation of the FDX standard.

Could you please name some relevant players who lead the US market toward Open Banking or are involved in data aggregation?

The 20+ members of our board represent a who’s who of the Open Finance ecosystem – from banks and investment companies to data aggregators and leading fintechs as well as trade associations are all in leadership roles. In addition, many software and services companies, consumer groups, and academics are active in the space. It is fair to say that every company working toward Open Finance can be considered a relevant player.

Compared with the regulation-driven UK market, what are the benefits of a market-driven Open Banking initiative, as is the case for the US? Will screen scraping be prohibited?

Government-driven programmes are subject to the whims and vagaries of election cycles and taxpayer-funded support. They tend to become ‘check-the-box’ compliance efforts rather than opportunities to innovate. FDX is a voluntary effort – all carrots no sticks. FDX is privately funded; it must provide value to the ecosystem and be efficient or it will cease to exist. Companies participate because they want to meet the needs of the consumer – the foundation of a market-led ecosystem. To survive, the participants must successfully satisfy consumer demand. Companies are constantly competing to offer new, better, faster, cheaper, and more powerful products and services. 

The FDX spec adds fields and features that the market dictates, as fast as the market dictates. There are currently 660+ data elements defined and in production, covering the breadth of consumer and small business financial lives, with many more to come. These elements go far beyond checking, savings, and credit cards, encompassing anything in the consumers’ financial life (CD/IRA, auto loans, home loans, pensions, 401k, crypto assets, investments, and many others). We added a fraud reporting endpoint, not because any regulator said to but because the members of FDX saw value in it for serving the customer. As customer needs change and emerge, FDX is capable of meeting those needs in near real-time. By their nature, government-driven programmes do not, and cannot, move at market speed. 

By making FDX beneficial and ubiquitous, it will organically displace credential-based screen scraping. Compare it to how cassettes, then CDs, then MP4, then streaming, each out-competed the prior technology.

What can you tell us about protecting consumer data? Any timelines for regulations or initiatives?

We do quite a bit to protect consumers – starting first with getting consumer permission on the nature of the data to be shared and the duration of that access. From there, we leverage best-in-class global practices to make sure no IDs or passwords are shared. We have design guidelines for displaying dashboards to consumers reminding them what sharing they have in place. We also have mechanisms to pass token revocation (termination of access) to the parties in a given data chain.

The CFPB (Consumer Finance Protection Bureau) has made several statements in the last six months about issuing a formal rulemaking on Dodd-Frank Section 1033. To that end, we believe the small business panel review as a part of that rule-making will be held in four or five months, with a publication of a rule a few months after that based on historical timelines for similar items.

What measures will be taken to make sure that third parties will hold and use consumer financial data securely? What regulatory agency will oversee data aggregator fintechs?

In North America, parties that share data enter into data sharing agreements – where they often spell out security requirements for data in motion (e.g., moving it using the FDX standards between FDX-certified endpoints), data at rest (stored), and data in use. A common framework for these agreements has been put forward by TCH (The Clearing House).

FDX does not comment on policy or regulation. We have shared public statements by regulators in a prior question, but it is on the reader to form their own conclusions.

How will consumers be educated and announced about how their data will be used?

As FDX ramps up its certification programme in 2023 & 2024, you will start to see a certification mark (think of the Bluetooth or USB logo on the packaging of a device as an example) with more information linked to the FDX Registry where you can learn what date and FDX version a company certified on.

Can you tell our readers about the projects you are working on now?

As mentioned above, FDX is constantly evolving to meet market-driven demands. We continue to work on adding capabilities and data fields to support what our members, and by extension their customers (your readers), demand. Some of the areas our members are currently looking at include corporate and treasury/ERP, wealth management, and other related needs.

What is the next innovation we should expect from banking in the US? Where is Open Banking headed in the country?

We are already at Open Finance – I think we will see the press and the market catch up to that in the next year. Also in the next year, we are likely to see the networking effect – ‘everyone’s on it because everyone’s on it’ – begin to manifest itself in North America.

This interview has first been published in the Open Banking and Open Finance Report 2022. Click here to download the report.

About Don Cardinal

As Managing Director, Don Cardinal leads FDX by engaging with FDX members across the financial services and Fintech ecosystem to develop and implement the FDX API technical standard. Since its launch in 2018, Don has grown the nonprofit standards body to over 200 member organisations.



About FDX

Financial Data Exchange, LLC (FDX) is a non-profit organization operating in the US and Canada that is dedicated to unifying the ļ¬nancial industry around a common, interoperable, royalty-free standard for secure and convenient consumer and business access to their financial data.

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Keywords: Open Banking, Open Finance, financial data, data sharing
Categories: Banking & Fintech
Companies: Financial Data Exchange
Countries: Canada, North America, United States
This article is part of category

Banking & Fintech

Financial Data Exchange

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