Recent bank failures have understandably captured the attention of North American consumers, markets and, of course, regulators. But while it is unquestionable that there are lessons to be learned for the banking sector and regulators in the wake of the events of the last few months, it would be a consequential mistake for U.S. and Canadian policymakers to pause the progress both countries are making toward open banking frameworks.
Unfortunately, there are indications that senior officials in both countries may hold this errant view. In April, the Acting Comptroller of the Currency
While policymakers must ensure the stability of the financial systems they oversee, these perspectives are fundamentally flawed.
Viewing regulatory progress on open banking as a potential risk to bank liquidity presumes bank customers do not already possess the ability to utilize technology-based tools to withdraw or move their funds today. In reality, even in the absence of any legally binding customer data rights in either Canada or the United States, more than 150 million U.S. customers and 6 million in Canada already use at least one third-party tool to connect to their bank accounts.
End-user reliance on third-party tools to help manage their financial well-being — underpinned by access to data held by financial institutions — is already a widespread reality across North America whether or not the CFPB implements a Section 1033 rulemaking or Finance Canada finalizes its long-awaited open banking framework. Consumers and small businesses in both countries depend on applications like Betterment, Questrade, Mint and others to manage their finances, send and receive payments and more.
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Even in the absence of this fundamental truth, the argument that open banking should be slowed out of fear it could contribute to runs on bank deposits relies on a belief that the salve to cure bank failures involves preventing customers from seeing their bank balances and transactions. (That is, after all, the fundamental underpinning of open banking and the CFPB's Section 1033 rule: a legal right for customers to access their financial data electronically and to share access to that data electronically.)
In truth, the counterargument would seem to be the more appropriate public policy outcome. In the midst of any potential bank liquidity crisis, bank customers should be provided more — not fewer — opportunities to access their account information and to utilize whatever tools they choose to help them navigate financial uncertainty.
Providing consistent and reliable financial data access to consumers and small businesses — and allowing these end users to choose their financial providers in a more competitive, transparent ecosystem — must continue to be a priority for North American policymakers. As we have seen in other jurisdictions that have implemented these rights for their citizens, increased competition resulting from data access and portability rights leads to more inclusive and accessible financial systems, lower fees and better financial outcomes for end users.
Banks and their regulators must reckon with the faster pace at which today's customers transact, and at which money moves, as compared to the past. In the United States, the banking system cleared approximately
