In the wake of the Consumer Financial Protection Bureau's release of its long-awaited data sharing rule, many financial institutions, including Regions Bank in Alabama, are stepping up their efforts to share data in a safer and more reliable way.
Regions is partnering with Axway, a data integration provider, to expand future open banking services for Regions' customers. One of Axway's products, Amplify Open Banking, will be integrated into Regions Bank's core systems to upgrade the bank's ability to share data with fintechs and other third-party financial service providers.
Its implementation of Axway's technology will help Regions Bank work toward compliance with the CFPB's recently finalized open banking rule, known as Section 1033 of the Dodd-Frank Act. Although the future of Section 1033 is uncertain in the face of pending litigation, many banks are looking to expand their open banking capabilities in anticipation of future competition and consumer demand.
Many banks are also looking to obtain a competitive advantage through data sharing, according to Paul Schaus, founder and CEO of CCG Catalyst, a Phoenix-based financial services consulting and research advisory firm.
"Institutions will adopt [open banking] faster because of competitive pressure," Schaus said in an interview. "You can't have a $3 billion bank saying, Oh, I don't have to put it in until x year when a $200 billion bank rolled it out today. … The competitiveness of this is going to force the $3 billion bank to do it right away."
A need to secure shared data is another motivator. Currently, Regions' customers authorize third-party platforms to obtain their financial data through a credential-based process known as "screen scraping," according to a press release from Regions. Screen scraping is universally considered less secure and more brittle than sharing data through application programming interfaces, or APIs.
The Axway Amplify platform will provide Regions Bank with the ability to deploy an API that can be consumed by third-party aggregators, according to Regions Bank emerging and digital payments group manager Tim Mills. "The API that we're using is actually based on the FDX 6.0 API standard, which is really becoming the industry standard," Mills said in an interview with American Banker.
"Open banking for Regions, as well as for the industry, is really revolutionary," says Tim Mills, Regions Bank emerging and digital payments group manager.
Regions Bank
The use of APIs lets banks narrowly define what data is shared. "The Axway solution gives us the ability to offer to our customers the power to say what specific dataset they want to provide access to by that third party," Mills said. "With screen scraping, you don't have that. … We can be very precise in utilizing that FDX API in the consent management."
Axway also offers consent management and tokenization, as well as the ability to integrate with Regions Bank's current tech infrastructure.
"It gives us the ability to have the customer actually get routed back to the bank where we can authenticate them," Mills said. "As a result of that authentication and capturing their permission, we can then provide a token that can be used by the third party to access that data. It's another way to provide for more privacy and security."
Regions Bank's open banking strategy has two main points of focus, according to Mills. One is providing security and privacy for the data the bank shares with fintechs and other banks. The second is making that a frictionless experience for Regions' customers.
One growing security challenge in open banking will be making sure the recipient of the data should be getting that information.
"Banks are going to have to have some controls to make sure consumers aren't sharing account data with someone they shouldn't be," Schaus said. "1033 is another opportunity for scammers."
Banks need a way to prove that the end entity is a legitimate recipient. "You can't just say, here are some published APIs, have fun," Schaus said. "The first time a consumer takes a big loss because they shared data with somebody they shouldn't have shared data with, the banks are going to be right in the crosshairs of that."
Schaus believes that fear and mistrust on the part of consumers has slowed the rollout of open banking. "It's like anything else in banking," Schaus said. "It will move at its pace based upon what consumers are driven by."
But consumer demand will also push banks to beef up their data-sharing capabilities the way Regions is doing. Since one of Region's strategic goals is creating a friction-free way for customers to share their financial data, Mills believes that open banking will help Regions offer more innovative and personalized services to their consumers in the future.
"Open banking for Regions, as well as for the industry, is really revolutionary," Mills concluded. "I think it's also a way to expedite the development of new products and services that add value to the relationship that our customers have with Regions, and more broadly the relationship that customers have with financial service players across the board."
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