ABA Banking Journal
No Result
View All Result
  • Topics
    • Ag Banking
    • Commercial Lending
    • Community Banking
    • Compliance and Risk
    • Cybersecurity
    • Economy
    • Human Resources
    • Insurance
    • Legal
    • Mortgage
    • Mutual Funds
    • Payments
    • Policy
    • Retail and Marketing
    • Tax and Accounting
    • Technology
    • Wealth Management
  • Newsbytes
  • Podcasts
  • Magazine
    • Subscribe
    • Advertise
    • Magazine Archive
    • Newsletter Archive
    • Podcast Archive
    • Sponsored Content Archive
SUBSCRIBE
ABA Banking Journal
  • Topics
    • Ag Banking
    • Commercial Lending
    • Community Banking
    • Compliance and Risk
    • Cybersecurity
    • Economy
    • Human Resources
    • Insurance
    • Legal
    • Mortgage
    • Mutual Funds
    • Payments
    • Policy
    • Retail and Marketing
    • Tax and Accounting
    • Technology
    • Wealth Management
  • Newsbytes
  • Podcasts
  • Magazine
    • Subscribe
    • Advertise
    • Magazine Archive
    • Newsletter Archive
    • Podcast Archive
    • Sponsored Content Archive
No Result
View All Result
No Result
View All Result
ADVERTISEMENT
Home Payments

Banking’s Open Door Policy

October 3, 2018
Reading Time: 3 mins read

By Evan Sparks

Special Report on Payments

  • New developments on the road to real-time payments.
  • A policy perspective on faster payments evolution.
  • Running the footrace against fraud.
  • Payments trends to watch in 2019.

“Open banking”—is it an aspirational slogan, a discrete business model or a regulatory regime?

For ABA VP Rob Morgan, who works on fintech policy, “it is what you want it to be.” The term is just vague enough to accommodate a wide variety of concepts, from access to customers’ financial data up to comprehensive financial marketplaces.

In Europe, open banking is closely associated with a specific European Commission regulation called the Payment Services Directive, known in its most recent incarnation as PSD2, which took effect in at the beginning of 2018. Under PSD2, bank customers may authorize third parties to securely access and process their bank funds. Banks are complying with PSD2 through the use of open application programming interfaces, or APIs, which allow different software components to exchange information.
Europe may be in the vanguard of this regulatory change, but it’s not alone. “So many countries have started to follow Europe’s standards—and actually go beyond,” says Dharmesh Mistry, chief digital officer at banking software company Temenos. In Hong Kong, for example, open banking directives encompass a broader range of financial products.

And while the U.S. for now has no comparable policy, U.S. banks are investing heavily in APIs as the core of the open banking concept, which at its broadest envisions a world where every consumer can easily access his or her financial data and authorize access to anyone else. APIs are widely known and used in the tech world—it’s the process by which a carefully lit and framed Instagram photo of dinner gets simultaneously shared on Facebook and Twitter. But when it comes to banking, “this isn’t a picture of what I had for dinner last night,” says Morgan. “This is financial data that really impacts my well-being.”

Secure APIs are the preferred alternative to a technique known as “screen scraping”—in which customers hand over their own account credentials to a third party, which stores those credentials to access the customer’s bank account. But this poses some risk for a customer—such as uncertain liability under Regulation E for unauthorized transactions made by a third party that has the login information.

For example, Wells Fargo has developed APIs that allow customers to securely share information with companies like Intuit (whose products include QuickBooks, Mint and TurboTax), Finicity and Xero. This way, “customers don’t have to use the screen scraping approach,” says Ben Soccorsy, SVP for virtual channels at Wells Fargo. “We’ve always advised customers not to share their credentials.” Other large banks like Chase and Capital One have been launching API partnerships with financial data aggregators and fintech companies to help their customers access a broader set of financial products without using screen scraping.

More broadly, open banking encompasses the ability to use new data tools like machine learning to improve both back-office functions like anti-money laundering compliance and front-office services like product creation, says Patrick Pinschmidt, a partner at Middlegame Ventures and former Treasury Department official. It provides a “tremendous opportunity . . . to move from the silo-based institution,” he says.

“Open banking is more about the business model and less about a particular product or architecture,” adds Prema Varadhan, chief product architect at Temenos, which recently rolled out a new front office suite that streamlines the ways banks develop and offer retail, commercial and wealth management products across all core platforms. No matter what business model a bank chooses, Varadhan points out, its architecture will need to have open APIs, security standards, scalability and real-time information.

Temenos digital strategist Kam Chana adds that embracing open—but secure—access to customer data will position banks well in the digital era. “Open banking is proving one way that banks are seeing that they can leapfrog rather than simply catch up with their peers,” she says.

ADVERTISEMENT
Tags: Big dataCustomer data accessFintechOpen banking
ShareTweetPin

Author

Evan Sparks

Evan Sparks

Evan Sparks is editor-in-chief of the ABA Banking Journal and senior vice president for member communications at the American Bankers Association.

Related Posts

CFPB proposes to regulate large nonbanks in personal loan market

Survey: Customer satisfaction with personal loans holds steady

Mortgage
May 16, 2025

Overall customer satisfaction with personal loans has remained largely flat, according to J.D. Power’s 2025 U.S. Consumer Lending Satisfaction Study.

CFPB launches ‘tip line’ to report on bureau employees

CFPB withdraws proposals on data brokers, digital payment mechanisms

Newsbytes
May 15, 2025

The CFPB has withdrawn two proposed rules concerning data brokers and digital payment mechanisms. Both were proposed after the 2024 elections.

Banker op-ed: Durbin-Marshall credit card bill will hurt small businesses

Report: Federal, state attempts to limit credit card interchange would harm consumers

Newsbytes
May 14, 2025

Legislation intended to reduce credit card interchange fees would reduce revenue for community banks and credit unions, leading to less access to credit and disproportionately harming low-income households, according to a recently published academic report.

Directors Briefing: Millbury National Bank marks 200 years  of independence with CEO transition

Directors Briefing: Millbury National Bank marks 200 years of independence with CEO transition

Directors Briefing
May 14, 2025

“Millbury National has always been about serving our community, and that will never change.”

Former NCUA chair named acting OCC head

Acting Comptroller Hood outlines OCC priorities

Newsbytes
May 13, 2025

In a recent speech, Acting Comptroller Rodney Hood outlined his top priorities for the OCC, including efforts to promote financial inclusion and expand the banks’ ability to provide cryptocurrency services.

Future risk and compliance professionals may be just down the hall

Marketing mutuality

Mutual Banks
May 12, 2025

Mutuals Matter campaign seeks to educate the public about what separates mutual banks from other financial institutions.

NEWSBYTES

ABA DataBank: Higher costs, less credit

May 16, 2025

Survey: Customer satisfaction with personal loans holds steady

May 16, 2025

Preliminary: Consumer sentiment fell 1.4 points in May

May 16, 2025

SPONSORED CONTENT

Choosing the Right Account Opening Platform: 10 Key Considerations for Long-Term Success

Choosing the Right Account Opening Platform: 10 Key Considerations for Long-Term Success

April 25, 2025
Outsourcing: Getting to Go/No-Go

Outsourcing: Getting to Go/No-Go

April 5, 2025
Six Payments Trends Driving the Future of Transactions

Six Payments Trends Driving the Future of Transactions

March 15, 2025
AI for Banks: A Starter Guide for Community and Regional Institutions

AI for Banks: A Starter Guide for Community and Regional Institutions

March 1, 2025

PODCASTS

Podcast: Accelerating banking for quick-service restaurants

May 8, 2025

How a Georgia community bank supports government-guaranteed lending nationwide

May 1, 2025

Podcast: Quantum computing’s shakeup in payments, cybersecurity

April 24, 2025
ADVERTISEMENT

American Bankers Association
1333 New Hampshire Ave NW
Washington, DC 20036
1-800-BANKERS (800-226-5377)
www.aba.com
About ABA
Privacy Policy
Contact ABA

ABA Banking Journal
About ABA Banking Journal
Media Kit
Advertising
Subscribe

© 2025 American Bankers Association. All rights reserved.

No Result
View All Result
  • Topics
    • Ag Banking
    • Commercial Lending
    • Community Banking
    • Compliance and Risk
    • Cybersecurity
    • Economy
    • Human Resources
    • Insurance
    • Legal
    • Mortgage
    • Mutual Funds
    • Payments
    • Policy
    • Retail and Marketing
    • Tax and Accounting
    • Technology
    • Wealth Management
  • Newsbytes
  • Podcasts
  • Magazine
    • Subscribe
    • Advertise
    • Magazine Archive
    • Newsletter Archive
    • Podcast Archive
    • Sponsored Content Archive

© 2025 American Bankers Association. All rights reserved.