A non-profit organization operating in the United States and Canada is the first to be recognized as a standard-setting body for open banking, the federal consumer financial protection agency said late Wednesday.
The application by Financial Data Exchange (FDX) to issue standards for open banking was approved by the Consumer Financial Protection Bureau (CFPB). Under the Personal Financial Data Rights (PFDR) finalized by the agency in June, CFPB said, financial institutions, credit card issuers, and other financial providers are required to unlock an individual’s personal financial data and transfer it to another provider at the consumer’s request for free.
The FDX approval will be effective for five years, the agency said.
A formal application process for standard-setters was announced by CFPB in September. The rule identified the attributes that standard setting bodies must demonstrate to be recognized by the agency. The rule also included a step-by-step guide for how standard setters could apply for recognition and how the bureau will evaluate applications, according to the agency.
According to CFPB, FDX’s role is to “develop, improve and maintain a common, interoperable standard for secure consumer and business access to financial records.” The organization has more than 200 member organizations, including depository and non-depository commercial entities; data providers and data recipients; data aggregators; service providers to open banking participants; trade and industry organizations; and other non-commercial members, including consumer groups.
The organization applied for recognition in September, and its application was published for public comment – the first to be release publicly.
Although the agency approved the application, there are some conditions, which CFPB said included:
- Ban on “pay-to-play” and other conflicts of interest: FDX must develop standards to promote open banking without regard to sponsorships or other financial incentives to give certain market players secret information or any other advantage. FDX would also need to ensure that the organization and its staff do not have any side arrangements that skew its financial incentives toward particular players in the industry, CFPB said.
- Mandatory reporting on market adoption: FDX must report to CFPB on market use of its consensus standards and/or maintain a publicly available resource where companies can disclose their use of standards as well as any certifications of adherence to standards, for the benefit of open banking participants, regulators, and the public.
- Transparency and availability of standards: The organization must make freely available to the public any consensus standards that it adopts and maintains, subject to reasonable safeguards, and to ensure that non-members have the same access as members do. FDX must also make publicly available information about its standards development and issuance processes.
CFPB Approves Application from Financial Data Exchange to Issue Standards for Open Banking
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