2023 could be a sea change in how consumers approach banks

In journalism, you're not supposed to make predictions. One reason is because the monastic order of reporters dictates that you're supposed to write from above the fray, but more practically it's because you don't want to make a prediction that turns out to be wrong. But we do it all the time anyway, because saying "I told you so" is so exhilarating, and more often than not, no one remembers when you were wrong.

So in that thrill-seeking spirit I have a prediction for 2023: This could turn out to be a very consequential year for consumers and the fundamental relationships they have with their banks. 

I say that because two very drawn-out regulatory and/or policy dramas are set to come to a close next year. The first is the launch of the Federal Reserve's FedNow faster payments network, and the second is the Consumer Financial Protection Bureau's completion of its Section 1033 data access proposal. Allow me to elaborate. 

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FedNow was by no means a foregone conclusion — The Clearing House, a consortium of mostly large banks that runs the private Automated Clearing House, or ACH, check-clearing system developed its own faster payments network in 2017. The Fed was under considerable pressure to either simply adopt that network as the one and only faster payments network or to build its own competitor to prevent what critics feared would be a big-bank monopoly over the nation's payments system. That debate has been over for some time; the Fed announced it would build its own network in 2019, and this year announced that FedNow was launching next summer, well ahead of schedule.

There is still some grumbling about whether the Fed should have built FedNow, and legitimate questions about interoperability, pricing and the ickiness of having a payments regulator running a competing payments network. And if the Fed ends up building a central bank digital currency, some of the FedNow efforts may be duplicative. (We'll see how that prediction turns out). 

But after 2023 it will be a fact of life, and the tangible effect of that change will eventually be that routine payments settle far faster a few years from now than we've been used to. That's good for consumers because they can pay and be paid more quickly than they do today; overdrafts, at least those incurred while waiting for checks to clear, could be a thing of the past. The rickety U.S. payments system will at long last have caught up to the rest of the developed world.

CFPB issues principles on financial data sharing

The CFPB's data access rule has also been a long time coming. Section 1033 of the Dodd-Frank Act gave consumers the right to any data a provider gains about the consumer through its interactions with the consumer, and further gave the CFPB the power to implement rules pertaining to consumer data. While 1033 doesn't expressly command the CFPB to implement an open banking regime in the United States, it certainly opens the door to one, and CFPB Director Rohit Chopra earlier this year said the rule would "[empower] people to break up with banks that provide bad service, and [unleash] more market competition."

There are a lot of ins and outs and what-have-yous to be ironed out between now and when the rule is proposed in 2023, and still more before it is finalized sometime in 2024. But if consumers can take their banking data and more easily interface it with a fintech, app or another bank, that could change the fundamental relationship that consumers have had with their banks for a very long time. 

Bank customers — and their deposits — are well known for their "stickiness." That is, because it's such a hassle to change your banking relationships from one bank to another, customers tend not to do it, even if some other bank may offer better savings rates or lower fees. But a finalized 1033 rule could change that dynamic in customers' favor, meaning banks may have to start working harder to keep their customers around than they've had to in the past.

Those two regulatory innovations — faster payments and open banking — are consequential on their own, but when taken together are greater than the sum of their parts. That isn't to say that the shift toward a more dynamic and speedier banking industry will occur overnight, but it is to say that if we look back on 2023 from the vantage point of, say, 2028, we may very well think of these as the "old days" before payments were fundamentally fast and banking relationships far more fungible. And if I'm wrong about that, no one will remember anyway.