CFPB picks FDX to set open banking standards

Dive Brief:

• The Consumer Financial Protection Bureau has approved the Financial Data Exchange’s application to be a standard-setting organization for open banking.
• Reston, Virginia-based FDX will be recognized as a standard-setting organization for five years, the CFPB said in a news release Wednesday, and will need to re-apply after that time is up.
• “This recognition order is based on the CFPB’s assessment of FDX’s application, FDX’s practices and procedures, and additional FDX documentation, including the organization’s certificate of incorporation and bylaws,” the bureau said in an order posted online Wednesday.

Dive Insight:

Open banking lets consumers more easily share and shift detailed financial information with financial institutions such as banks and credit card companies. Advocates for open banking say the change in industry practices the process will make it easier to apply for a loan or switch banks or credit card providers. 

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Open banking is already widely available in Europe as a result of the European Union’s revised Payment Services Directive.

FDX is a nonprofit that already sets data sharing standards for its members, which include about 200 banks, fintech companies and consumer advocacy groups. The group, which has a board made up of fintech and bank executives, applied to be a standard setting body in September.

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The organization expects to have the standards finalized for open banking in the U.S. in the coming months, FDX CEO Kevin Feltes said in an interview Thursday. “This recognition provides helpful clarity to the market at a critical time,” he said.

Any group that applied to be a standard-setting body needed to demonstrate that it was open and transparent; could make balanced decisions; and could set up an appeals process for any disputes, the CFPB’s release said.

One other organization, the Digital Governance Standards Institute, has applied to become a standard-setting body, a CFPB spokesperson said in an email. The Institute — which applied on Oct. 25 — is a Canadian nonprofit that also sets standards for the sharing of financial data. American companies such as Amazon Web Services and Equifax are among its members.

“That application is still pending and the CFPB is continuing to evaluate that application,” the bureau’s spokesperson said.

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A spokesperson for the institute did not immediately respond to a request for comment.

Under a personal financial data rights rule that the CFPB finalized in October, organizations could ask for the right to set standards for the sharing of personal financial information. 

The bureau’s open banking rule requires financial institutions with more than $850 million in assets to transfer a consumer’s financial data to other providers for free at the consumer’s request