April 14, 2026 5:53PM # Mandatory Open Banking: Be Careful What You Wish For By [Solveig Singleton](https://www.cato.org/people/solveig-singleton) and [Ryan Chan-Wei](https://www.cato.org/people/ryan-chan-wei) --- SHARE Listen to this article Generated with [ ElevenLabs](https://elevenlabs.io/) AI technology. Loading the [Elevenlabs Text to Speech](https://elevenlabs.io/text-to-speech) AudioNative Player... ![Open Banking Cmt Graphic](/sites/cato.org/files/styles/pubs_2x/public/2024-01/Open-Banking-Cmt-Graphic.png?itok=ouUK6wlW) Open banking refers to arrangements in which financial service providers, such as banks, with their customers’ consent, share their customers’ financial data with fintechs and other similar providers. Typically, the shared data would include account balances or transaction histories. Data sharing can power many consumer-facing products, including budgeting tools, investment platforms, and payment services. Today, financial service providers enter open banking arrangements voluntarily, and it would be a mistake to change this. **Open Banking Is Happening Without a Broad, Mandatory Regime** Open banking arrangements can be freely negotiated between banks and financial service providers, or regulators can make data sharing mandatory. In 2024, the Consumer Financial Protection Bureau (CFPB) [finalized](https://www.consumerfinance.gov/personal-financial-data-rights/) a rule making data sharing mandatory. But in August of 2025, the CFPB [announced](https://www.consumerfinance.gov/rules-policy/rules-under-development/personal-financial-data-rights-reconsideration/) it would reconsider, and a federal court [blocked](https://www.paymentsdive.com/news/judge-blocks-open-banking-rule-fintechs-CFPB-crypto/804190/) enforcement of the 2024 rule. This is a welcome development. The policy argument for mandatory open banking is that incumbents, such as traditional banks, will rarely [share](https://fedsoc.org/events/your-data-your-choice-consumer-rights-and-privacy-in-the-open-banking-debate) data voluntarily. However, the evidence tells a different story. For a start, incumbent financial services have strong market incentives to negotiate. Consumer [demand](https://www.federalregister.gov/documents/2023/10/31/2023-23576/required-rulemaking-on-personal-financial-data-rights) is a powerful impetus: 78 percent of Americans now [use](https://plaid.com/the-fintech-effect-report-2025/) fintech apps, up 20 percentage points since 2020, and 77 percent [say](https://plaid.com/the-fintech-effect-report-2025/) their bank should connect with those apps. Furthermore, banks have compelling security reasons to negotiate voluntary data-sharing agreements. In the absence of such agreements, third parties may engage in “screen scraping,” the practice of using customers’ login credentials to access data. Screen scraping presents operational security [risks](https://bpi.com/screen-scraping-what-is-it-and-how-does-it-work/). A 2020 study found that one aggregator alone held login credentials for more than 200 million bank accounts, [posing](https://bpi.com/screen-scraping-what-is-it-and-how-does-it-work/) serious risks of fraud and data breaches. Given the incentives, it is unsurprising that the market has responded. Over the past decade, many notable voluntary open banking agreements have been negotiated, and this trajectory will continue. In 2023, Fiserv [partnered](https://www.businesswire.com/news/home/20231012277216/en/Fiserv-and-Plaid-to-Revolutionize-Secure-Data-Sharing-for-Financial-Institutions-and-Consumers) with Plaid to bring API-based connectivity to roughly 3,000 community banks and credit unions, and TD Bank and FIS both [signed](https://stories.td.com/ca/en/news/2023-12-14-td-bank-group-and-plaid-enter-into-north-american-data-acces) [major](https://www.fisglobal.com/about-us/media-room/press-release/2024/fis-drives-secure-open-banking-for-financial-institutions-and-consumers) data-sharing deals. In 2025, JPMorgan Chase [entered](https://www.cnbc.com/2025/11/14/jpmorgan-chase-fintech-fees.html) into paid data-access agreements with fintech firms, and Truist [introduced](https://media.truist.com/2026-02-12-Truist-launches-secure-open-banking-experience) an open banking integration with Mastercard in early 2026. Furthermore, the Financial Data Exchange (FDX), an industry-led API [standard](https://financialdataexchange.org/fdx-feed/114-million-reasons-to-keep-moving-forward-on-industry-led-standard-for-secure-data-sharing/) created to promote open banking, has grown rapidly—114 million connections were aligned with the FDX standard as of April 2025, a 50 percent increase from the prior year. Finally, JPMorgan Chase has [eliminated](https://www.americanbanker.com/news/jpmorgan-chase-says-it-has-fully-eliminated-screen-scraping) screen scraping, and Wells Fargo will soon be in a [similar](https://www.americanbanker.com/news/wells-fargo-says-it-has-nearly-eliminated-screen-scraping-threat) [position](https://www.americanbanker.com/news/wells-fargo-pnc-tell-trustly-to-stop-screen-scraping-customer-data). All of this happened voluntarily, without any federal mandate in place. In short, the incentives to negotiate open banking agreements are strong enough for market forces to catalyze adoption. Making open banking mandatory would do little to advance deals that make economic sense and would have very high regulatory costs. **No, Mandatory Open Banking Would Not Work Like Wireless Phone Competition** Advocates for mandatory open banking hope it would [yield](https://www.consumerfinance.gov/about-us/newsroom/prepared-remarks-of-cfpb-director-rohit-chopra-at-the-federal-reserve-bank-of-philadelphia-on-the-personal-financial-data-rights-rule/#:~:text=One%20foundational%20aspect%20is%20to,rule%20using%20this%20dormant%20authority) the same benefits as wireless telecom competition. Former CFPB Director Rohit Chopra explained this view: > One of the best ways to support a vibrant market is to eliminate roadblocks to competition. In the early years of the wireless phone market, switching to a new carrier was extremely cumbersome, requiring you to get an entirely new phone number. The Federal Communications Commission … instituted a policy requiring wireless number portability between carriers. This dramatically reshaped the competitive dynamics, creating incentives to compete on service and prices. But mandatory open banking would not work like this. Instead, it would foment endless disputes and distort investment. - Yes, the Federal Communications Commission (FCC) boosted telecom competition by allowing customers to keep their phone numbers when they switched carriers, through the “number portability” policy Chopra describes above. But number portability was technically simple and did not [create](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3689171) security risks, *entirely unlike* sharing consumers’ financial data. Mandatory open banking will not work like number portability. - The FCC was an experienced market structure regulator—not the enlightened, apolitical expert agency hoped for by New Deal theorists—but an agency that had learned from its own errors. The CFPB has no experience to inform efforts to restructure markets through open banking and was not designed for such a role: the Bureau will make mistakes. - One of the 2024 CFPB’s mistakes was requiring data providers to share customer data for free, sharply limiting data providers’ incentives to cooperate or invest in open banking infrastructure. By contrast, in requiring telecom carriers to interconnect, the FCC not only recognized that carriers should be allowed to charge but also favored market pricing. At first, the FCC’s “reciprocal compensation” rules encouraged carriers to negotiate the price of interconnection. Eventually, the FCC moved to “bill and keep,” which assumes that traffic between carriers balances out and [allows](https://docs.fcc.gov/public/attachments/DOC-367447A1.pdf) carriers to recover the costs of interconnection from customers. - The 2025 CFPB’s reconsideration notice hints that the agency might allow banks to charge fees sufficient to recover marginal costs, which would entail price regulation, another bad idea. This recalls the FCC’s greatest failure, the “unbundling” rules that required incumbents to share network elements with resellers at cut-rate prices [based](https://srgexpert.com/wp-content/uploads/2023/10/Measuring-long-run-marginal-cost-for-pricing-2014.pdf) on marginal cost. New resellers emerged but remained dependent on the incumbent to cover much of their costs; many of these inefficient entrants failed. Investment by incumbents and new entrants alike [lagged](https://www.criterioneconomics.com/docs/innovation_investment_and_unbundling1.pdf). The result was regulatory arbitrage, not competition. After a decade of litigation and endless regulatory disputes, the FCC’s unbundling regime went down in flames. - Telecommunications had been dominated by government-supported monopolies, and wireless competition [remains](https://news.cision.com/ibisworld/r/top-10-highly-concentrated-industries,c9219248) concentrated even today. Financial services [were (and are)](https://www.philadelphiafed.org/-/media/frbp/assets/economy/articles/economic-insights/2023/q1/bt-has-the-banking-industry-become-too-concentrated.pdf) much more competitive. The potential upside from (artificially created) competition in financial services is less. Yes, some incumbent data providers have asked for a lot of money to share data. And negotiations can be slow. But price and schedules can be negotiated. Short-sighted top-down market structure rules cannot be. Markets don’t need to work perfectly; they just need to work better than regulation. ##### Related Tags [Banking and Finance](https://www.cato.org/banking-finance), [Regulation](https://www.cato.org/regulatory-studies), [Technology and Privacy](https://www.cato.org/technology-privacy), [Other Government Agencies and Programs](https://www.cato.org/other-government-agencies-programs-0), [Center for Monetary and Financial Alternatives](https://www.cato.org/center-monetary-financial-alternatives) [![Creative Commons License](/build/cato_2020/images/creative-commons.svg)](http://creativecommons.org/licenses/by-nc-sa/4.0/) This work is licensed under a [Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License](https://creativecommons.org/licenses/by-nc-sa/4.0/).