Open Banking
Open banking is a framework that gives consumers the right to share their financial data held at banks and financial institutions with authorized third-party applications and services, enabling the development of new financial products and personalized financial management tools. In the United States, open banking is governed primarily by Section 1033 of the Dodd-Frank Act and associated CFPB rulemaking.
Open banking is predicated on a foundational principle: that financial data generated by a consumer belongs to that consumer, and that consumer should have the right to share it with services of their choosing. When a consumer authorizes a personal finance app to access their bank account transaction history, or allows a lending platform to view their account balances to underwrite a loan, they are exercising an open banking right.
In the United States, the open banking framework developed more slowly and less prescriptively than in the United Kingdom and the European Union, where regulatory mandates (specifically, the EU's Revised Payment Services Directive, known as PSD2) established explicit requirements for banks to open APIs to licensed third parties. In the U.S., data sharing emerged largely from the market: companies like Plaid, Finicity, and MX built data aggregation businesses that connected consumer-authorized third-party apps to bank account data, initially using credential-based screen scraping and later migrating to direct API connections as banks began offering them voluntarily.
The CFPB issued a landmark rule under Section 1033 of the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2024, establishing formal consumer data rights in the United States and requiring covered financial institutions to provide standardized API access to authorized third parties. This rulemaking brought the U.S. closer to the more structured open banking frameworks seen internationally, though the rule faced legal challenges and implementation timelines varied by institution size.
For consumers, open banking enables a new generation of financial services: apps that aggregate accounts across multiple institutions into a single dashboard, tools that automatically analyze spending patterns and identify savings opportunities, lending products that use real-time account data instead of traditional credit scores, and personal financial management platforms that can proactively flag unusual account activity. Mint (now Intuit Credit Karma), YNAB, and Rocket Money are among the U.S. consumer applications most associated with data aggregation enabled by open banking infrastructure.
For the financial services industry, open banking introduces competitive pressure on incumbent banks by reducing switching costs. If a consumer can seamlessly port their financial data history to a competing bank or fintech, the informational lock-in that has historically kept customers with their primary bank is diminished. Incumbent banks have responded with varying degrees of enthusiasm — some investing in their own API programs and developer ecosystems, others resisting rapid data portability adoption.
From an equity market standpoint, companies that sit at the infrastructure layer of open banking — particularly data aggregators and API providers — attracted significant venture and private equity investment in the late 2010s and early 2020s. Visa acquired Plaid in a deal announced at $5.3 billion before the acquisition was abandoned following Department of Justice antitrust concerns in 2021, illustrating both the strategic value of financial data infrastructure and the regulatory complexity surrounding consolidation in this space.