For the past year, the financial landscape has revolved around two influential technologies: open banking and genAI.
Open Banking has been a hot topic due to the evolving discussions triggered by the Consumer Financial Protection Bureau’s introduction of Rule 1033, which focuses on the ownership and control of customers and their data. Gen AI has been the other driving force, primarily due to its long-standing hype cycle.
Unfolding the ways in which open banking and genAI shaped the fintech space in 2024, and how their trends are predicted to expand in 2025, can offer some fascinating insights.
Open Banking in 2024: Where We’ve Been
The introduction of CFPB Rule 1033, albeit subject to dispute, has undoubtedly accelerated the transition of open banking from being a mere concept to an impending reality.
As I discussed in my last post, rule 1033 is a groundbreaking regulation aimed at empowering consumers with greater control over their financial data. The rule mandates that financial institutions provide consumers with secure access to their own financial information, enabling them to share it with third parties if they choose.
The intent behind Rule 1033 is to foster innovation and competition within the financial sector. It facilitates consumer-friendly services such as budgeting tools, payment platforms, and fintech applications, all while emphasizing data privacy and security.
Of course, this is in a context where these technologies are paired with other innovations across the industry, and other regulatory developments around the globe, all of which helped progress open banking this year, too.
Ongoing support at the technological and regulatory levels will be crucial for its sustained growth.
Infrastructure & Capacity Remain Concerns for Banks
The path forward for banks varies based on the size of the bank in question.
Larger and regional banks are proactively constructing the technology and infrastructure necessary for compliance. They’re also exploring potential use case scenarios and opportunities at the same time.
Medium- to small-size banks have much more limited resources, though. And the infrastructural requirements pose a significant challenge for them. As a result, they’re primarily taking one of two tacks:
- Seeking technical solutions from a third-party vendor
- Deprioritizing open banking entirely, considering the extended timeframe for compliance
Banks striving for compliance with Rule 1033 need to build (or buy) a consumer portal, an enhanced third-party risk management solution, and a developer (API) portal. That will all demand some resource-intensive tasks in an ecosystem that’s already stretched thin.
Trending: Open Banking in 2025
So, there is still a lot of uncertainty regarding the general rollout of open banking.
But, as we keep maneuvering through the complexities of infrastructural development and evolving regulations, I think we’ll see several trends unfold:
Broader Financial Inclusion
Traditional credit decision systems often exclude a significant number of customers from accessing liquidity and credit. Open banking can let us explore innovative uses of alternative data. It can enable customers who exist outside of the mainstream credit ecosystem to gain control of their own financial futures.
Expanded Opportunities for Vendors
Tech service providers play a vital role in facilitating the transition towards novel technologies within the industry. The demand for vendors specializing in open banking is going to surge following the final approval of Rule 1033.
Product & Experience Development
There will be more of a focus on customer experience. The availability of improved data sets can simplify existing customer-facing processes like account opening and loan underwriting. There will also be more emphasis on operational efficiency; banks can leverage increased data availability to enhance anti-fraud measures and related back-office operations.
We’re in a Pivotal Moment for Fintech & Banking
Open banking creates opportunities for enhanced inclusivity, innovation, and operational efficiency. This will be accomplished by empowering consumers with greater access and control over their financial data.
Financial institutions, tech providers, and customers alike stand to benefit from this paradigm shift as the industry embraces a more collaborative and transparent ecosystem.
I feel confident in saying that the future of banking hinges on our ability to adapt and innovate, and open banking is the foundation upon which this transformation is currently being built.
