By Angelina Renaldo, Innovation Strategist, Velera 

The Consumer Financial Protection Bureau’s Section 1033 final rule, Personal Financial Data Rights, brings with it complex facets: what compliance entails and its broader implications; the Bank Policy Institute lawsuit in U.S. District Court in Kentucky which challenges aspects of the rule; and a change in administration raises questions about the ruling’s longevity. For some, skepticism lingers over whether Personal Financial Data Rights will endure or be overturned. 

Credit unions — regardless of their size or membership base — face no shortage of priorities demanding attention and may have distanced themselves from an open banking strategy, citing their exemption from the final rule or preferring to wait for clarity from the courts or the administration. However, allowing this regulatory pendulum to set the direction may not be in their best interest.

Industry observers and those invested in open banking trends widely agree regulatory uncertainty or exemptions should not determine strategy. Financial institutions that proactively embrace open banking position themselves to outperform those that do not. As PNC CEO Bill Demchak starkly noted in Banking Dive, “We’ll pull share out of smaller banks who won’t have the technology to be able to take advantage of open banks.”

While there is broad recognition that open banking can drive innovation, credit unions must tackle the challenge of integrating it into an already lengthy list of strategic priorities. Balancing the need to compete in today’s dynamic environment while building sustainable futures for their members is no small task. The pendulum of regulation may swing credit unions away from open banking, but there is another path. By fostering awareness and building support, credit unions can embrace the connected financial ecosystem, ensuring they remain competitive and relevant for future generations.

In a time of flux, the question for credit unions isn’t whether to engage with open banking - it’s how to do so before the pendulum swings too far in a direction that leaves them behind.

Strategic Imperatives in a Connected Financial Ecosystem

Engaging with open banking presents credit unions a chance to move their members and their credit union data away from “screen scraping” and to standardized, API-based data sharing that enhances transparency and control for both consumers and financial institutions. Moving to standardized data sharing practices provides transparency and control of whom data is being shared with, what data is being shared and how it’s used, and how long it will be used and retained. This was a strategic play among many large banks, as several started working on their consumer data sharing practices years ago, implementing policies and platforms that enable this type of data exchange and allow banks to participate in the growing open banking ecosystem and leverage consumer financial data to offer new products and services. Akoya, a data access network and middleware that sits between over 4,000 financial institutions, fintechs and data aggregators, is co-owned by Fidelity Investments and eleven large banks. 

These standardized data sharing practices are helping reshape financial institutions’ offerings by providing fintechs and financial service providers with clarity around data inputs – the specific data elements that will be shared, how the data will be formatted, the duration of access and reliability of uptime. This removes much of the guesswork around how solutions will perform, allowing providers to confidently design and implement creative strategies that respond to emerging opportunities. Plaid, another prominent data access network, connects more than 12,000 financial institutions, 8,000 fintechs and 500 million consumer accounts, illustrating that consumer-permissioned data sharing is firmly embedded in human behavior and that industry players are leaning into a connected financial ecosystem to gain share from rivals. 

A Connected Financial Ecosystem Accelerates Creative Strategies

In conjunction with standardized data sharing practices, the extent of consumer-permissioned data sharing is expanding into open finance — investments, loans, insurance policies, payroll and taxes. This progression invites us to think about how broader data sets might create value for members and shape the future of financial services as open finance aims to provide consumers and businesses with the ability to control and share all their financial data for improved ways to manage their financial lives. Consumers’ openness to sharing personal financial data fuels the emergence of innovative solutions built on an open banking framework and will continue to fan the trajectory of future solutions. As data sharing over APIs expands across different data sets, organizations, leaders and stakeholders are forward-thinking about greater strategic partnership opportunities and how to continue that momentum of delivering solutions that positively impact consumers and the bottom line. Collaboration and connectivity aren’t just a competitive advantage — they’re becoming essential to delivering seamless, consumer-centric experiences.

Open banking, viewed as a collaborative framework, offers credit unions the chance to engage with partners who help not only enable secure consumer-permissioned data sharing, but also help with data integration to enhance member services. 

There are many ways an interconnected approach can strengthen member engagement: 

• Offer members a secure, reliable and efficient way to share their financial data and manage their financial lives
• Actionable intelligence to products/services used outside the credit union to ideate and drive product road maps
• Provide members a holistic view of all their financial accounts/credit cards to drive personal financial management and wellness 
• Support credit unions in account opening, loan underwriting and servicing, risk mitigation, authentication and accounting (SMBs)
•  Notifications in cases of suspected fraud

As we enter this new era in data sharing, collaboration and connectivity are key to building a foundation for future success. Credit unions can approach open banking as an opportunity to assess how the ability to gather data on members can help shape and personalize future service and solution offerings they build for their current and prospective members. By embracing the principles of open banking — user control, access, transparency, traceability and security — credit unions can elevate their mission of people helping people and showcase how smaller institutions can effectively pull share from larger rivals.

Angelina Renaldo is an Innovation Strategist at Velera, where she champions robust digital solutions geared at enhancing service and member experiences. With 20 years of experience in the credit union space, Angelina has overseen operations, as well as product and marketing strategies, to support organizational growth and drive innovation to transform digital experiences for members and improve processes for internal teams.