Has the U.S. Reached a Tipping Point with Open Banking?

Open banking has heated up in 2020 according to Julie Muhn

This year has brought on a lot of changes for U.S. businesses and individuals alike– some for the worse, and others for the better.

One change that fits into the latter category– open banking– has heated up in 2020. There are four indications that the U.S. may be at a tipping point when it comes to open banking:

More consumers than ever are using digital financial services. Not only has the coronavirus has halted in-person activities, it has also prompted users to focus on their finances.

We’ve finally agreed that screen scraping is a bad way to aggregate accounts. Last week, even Wells Fargo announced it has stopped using screen scraping as a data aggregation technique.

Consumers have become aware of their data usage. Big tech companies like Facebook were put on trial in the U.S. in 2018 for questionable usage of consumer data. Now, in an election year, and with films like Netflix’s The Social Dilemma, users are more aware than ever of how tech platforms use their data to sway their opinions.

There’s more competition than ever in the B2C fintech space. New competitors are laser-focused on perfecting the user experience, and have started making data management as easy as possible for consumers.

All of these elements have aligned to bring the U.S. to a tipping point in open banking. There is still one thing missing, however, and that is a unified approach for data sharing.

Whereas Europe enjoys standardization through common API specifications thanks to PSD2, the U.S. is lacking direction. Instead of a government-mandated approach, the market is currently being driven by private players such as Plaid, MX, Envestnet|Yodlee, and others.

Despite challenges, 2021 may the year for open banking in the U.S. As the global pandemic continues next year, so will consumers’ online presence, and ultimately their awareness of their digital rights. Earlier this week, the U.K. surpassed 2 million consumers using open banking, more than double the number recorded in January of this year. And even though the U.S. still has a long road ahead to fully realize open banking, take hope– we’re closer than we’ve ever been.