Why Citizens is keeping open banking despite rule rollback

Bloomberg

The Trump administration is doing away with a regulation designed to promote data sharing between banks and third parties. But for Citizens Financial, the move isn't hindering its bullishness on the broader concept.

"This doesn't change our strategy," Eric McCabe, Citizens' head of embedded finance, told American Banker.

Open banking refers to technology that enables third parties to connect to bank accounts with the account holder's consent to share data.

The Consumer Financial Protection Bureau earlier this month asked a federal court to kill a CFPB rule related to open banking which mandated that banks share data at a consumer's request. The move is part of a broader deregulatory posture during the second Trump administration, which includes an attempt to downsize or dilute the CFPB. The move also comes as banks and the major card networks continue investment in open banking. 

Why Citizens isn't concerned about 1033's demise

Called 1033 after a section of the Dodd-Frank Act that passed in the wake of the 2008 banking downturn, the open banking rule says consumers have rights to their financial data, meaning it can be shared with other companies.

The rule was expected to enable nonbank financial institutions to better compete with banks. It is also part of a trend toward embedded payments and finance — or the practice of attaching payments or banking to other services. The data sharing regulation covers banks that offer checking accounts, prepaid cards, credit cards, mobile wallets, payment apps and other similar products.

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Banks had opposed the 1033 rule on cost of compliance grounds, though market forces in recent years have made open banking an attractive strategy for banks.

Many U.S. banks have also been adopting open banking to adhere to the Second Payment Services Directive, a 2021 European open banking regulation.

"1033 was focused more on consumers," McCabe said, adding Citizens has approached open banking as an "enterprise" or business project, combining people from a wide range of departments. That doesn't directly relate to the 1033 regulation but more about the general market demand for improved data sharing, and how internal collaboration can streamline project management.

"Most banks have their own staff for corporate and consumers," he said.

Citizens built its open banking application programming interface to enable clients to have secure and seamless access to their Citizens data from their external platforms of choice, McCabe said.

"We then pursued our development in a manner that would comply with 1033, but it wasn't the driving factor," McCabe said.

The bank has spent more than two years working on its open banking project and has suggested banks continue their own work on open banking and other forms of data sharing.

Citizens' open banking service enables businesses to link their Citizens' accounts to a third-party platform through an API. Businesses use the API to support permissioned data sharing without using an older practice called screen scraping that has long raised security and privacy concerns among banks. Citizens says its API has reduced screen-scraping usage by more than 90%.

"The impetus was to get away from screen scraping. Banks don't like that. So the APIs give an alternative," McCabe said. 

Open banking's not going anywhere

While no one knows exactly what will come next, open banking is here to stay, Kiernan Hines, principal banking analyst at Celent, said in a research note about the uncertainty of the 1033 rule.

More than 25% of banks in the U.S. say open banking-led product innovation is one of their three leading technology investment priorities for 2025, according to Celent, though Hines noted that survey was taken before the CFPB's recent suit.

While the CFPB's recent move to eliminate the 1033 rule will cause the development of open banking to "take a hit," open banking will continue to grow and has already had a huge impact on financial services, Hines said.

"Many financial institutions now view open banking as a genuine opportunity to sit on the other side of the value chain and enhance their own workflows and customer-facing services," Hines said. 

"While the rules of the road will continue to evolve, if not formulate, the open-banking toothpaste is out of the tube; customers expect to be able to leverage account data without friction," Gary Stein, managing director in Accenture's North American Payments practice, told American Banker.

 There are five "no regrets" actions on open banking that Accenture advises banks to take that made sense before the 1033 rule was expected to go into effect and still do today after the rule's demise. 

Those steps are: 

• Establishing a third-party risk management program covering data aggregators and users; 
• Building an efficient, scalable data architecture; 
• Implementing a centrally governed API gateway that facilitates data sharing across retail, commercial and wealth sectors; 
• Enabling tracking mechanisms to measure ROI and contributions to business performance; and 
• Adhering to key consumer protection principles outlined in the rule to ensure long-term resiliency.
  

"Customers expect to be able to leverage account data without friction," Stein said.