6 minute read 28 Mar. 2019
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How a rapidly evolving US open banking ecosystem will take shape

Innovation, collaboration and competition are rapidly shaping the open banking ecosystem in the US.

This article is part of our Open Banking Opportunity Index.

Open banking in the US benefits from robust innovation and a thriving FinTech environment. Moreover, intense competition among banks is prompting many regional banks to partner with FinTechs to secure their place in the open banking vanguard, and, avoid being outmaneuvered by the global banking giants.

Interestingly, the US is moving toward an open banking environment organically without a strong regulatory mandate. Most in the financial services industry appreciate that US regulators are taking a largely hands-off approach to open banking, and they consider it the best way to foster continual innovation and ensure the market develops in a way that best serves customers. However, in the absence of regulatory guidance, financial services companies will need to settle on standards among themselves, something that could delay open banking adoption.

Even with this caveat, the dynamics of the US open banking market are potent, drawing added energy from very strong consumer sentiment toward open banking and the convenience it could make possible. Ultimately, weighing all these factors, the US placed fourth in our EY Open banking Opportunity Index, which assessed the readiness of ten different markets around the globe to foster a vigorous open banking environment.

US - open banking opportunity index us ranking

In the Index open banking is defined as online banking and financial services enabled through consumers ability to offer third-party providers access to their personal bank account data and payment initiation. Third-party providers can use a variety of mechanisms and tools, including ‘screen scraping’ and APIs.

The Index research assessed four areas: the regulatory landscape, adoption potential, consumer sentiment and the innovation environment. We believe these four pillars are key indicators for open banking success.

The Index also shows that most individual markets need to strike a better balance between implementing regulatory structures, building consumer trust, and encouraging innovation.

Regulators are taking a wait-and-see approach

As noted, US regulators are taking a very light touch to open banking. Their ‘organic’ approach to open banking is in sharp contrast to the UK’s highly prescriptive regulatory model.  

That’s not to say that regulators in the US have been silent on the matter. In July 2018, the Treasury released a report advising the Bureau of Consumer Financial Protection to affirm that third parties authorized by consumers, including data aggregators and FinTech providers, would be entitled under the Dodd-Frank Act to access financial account and transaction data. The Treasury also wants to move firms away from screen scraping to more secure methods of data access but says the solution should be developed by the private sector.

The question remains, however, how fast US banks can settle on industry standards and move ahead with open banking without firmer regulatory involvement. 

Regulation, trust and consumer sentiment

A culture of convenience could spur adoption

Based on 2017 data from our FinTech Adoption Index, US ranks sixth on consumer adoption potential. However, that might somewhat underestimate the true potential. Millennials, for example, are a cohort that are by and large fairly comfortable sharing data and transacting online; they are also entering their prime earning years and may begin to expect open banking services. Open banking also fits neatly into the US culture of convenience. It’s possible that any misgivings users may have about sharing data and transacting online will be outweighed over time by the enormous convenience of open banking.

Moreover, given the hands-offs regulatory approach and the intense competition among banks to win US consumers, institutions and their FinTech partners are likely to develop open banking products and services that are highly tailored to consumer needs. This hyper focus on the customer – as opposed to regulatory mandates – may help to spur consumer adoption.

Consumer sentiment is strong despite privacy concerns

According to our Index, US consumers have the second-best consumer sentiment score regarding open banking, behind only mainland China. Thirty-four percent of digitally active consumers were comfortable sharing transaction data with FinTechs for better services – a finding that implies that consumers put a premium on convenience, even as questions about data privacy and cybersecurity persist.

The consumer sentiment analysis in our Index was derived from social media, blogs and forums. Overall, 28% of these references were positive and 9% were negative, for a net positive score of 19%. 

Consumer sentiment insights: US vs. global

This overall score derived from sub-scores in three broad categories:

  • Open banking: Posts mentioning ‘open banking’ explicitly or referring to PSD2. The net positive sentiment here was 18%.
  • Sharing Financial Data: Posts that discuss sharing of financial/bank data with third parties. The net positive sentiment was 26%.
  • Services: Posts that discuss apps, tools or services of the type enabled by open banking. The net positive sentiment was 16%.

Consumers were most positive about innovation – 27% of positive posts on open banking referenced innovation. And despite the many high-profile data breaches in the US, consumer’s control of data accounted for 18% of positive posts. That said, the biggest concern is still data protection, which accounted for 36% of all negative posts. Cybersecurity concerns accounted for another 13%. And, in a sign that there is still resistance to change, innovation was discussed in 16% of negative posts.

Overall, however, US consumers seem to feel positive about the pace of innovation and are growing more comfortable with sharing data. To build on this trend, banks will need to ensure they frame open banking as a way to make consumers life easier, their experiences more personalized, and their transactions more secure. Banks need to avoid debating about who owns the customer data, and how they plan to monetize customer data. These sorts of conversations only make consumers cautious, while the idea of convenience and improving their experience will continue to resonate and improve sentiment.

Innovation is strengthening US open banking

Among the four Index pillars, the US really stands apart when it comes to innovation, where it placed first. The country has a thriving FinTech industry: 141 FinTechs received venture capital funding rounds in the last three years; meanwhile, banks and FinTechs filed 128 patents in 2017. On both these metrics, the US led all the other nine markets surveyed.

Not only that, the intense competition in the industry is prompting regional banks to partner with FinTechs. They feel some urgency to do so given what’s occurring in the UK, where regulators are mandating the transition to open banking. Once global banks roll out those services in the UK, the theory goes, it’s only a matter of time before they extend open banking into the US. Regional banks hope to leverage their lack of legacy systems and relative agility compared to global banks to get a jump on open banking.

Ironically, while the UK’s regulatory approach may indirectly prompt more banks to partner with FinTechs and pursue open banking, the light touch of US regulators may allow players to develop an ecosystem that can react more precisely to customers and be more conducive to meeting needs. That said, one of their biggest challenges may be meeting customers’ high expectations. Products and services must continue to evolve and be relevant or consumers simply won’t adopt them.

Open banking’s future

Looking further into the future, the industry may evolve to a hub-and-spoke model, where the bank assumes the central role of managing the customer relationship, while third-parties provide the individual products and services – from mortgages, consumer loans, commercial loans to know-your-customer and Bank Secrecy Act compliance. Before that can occur, institutions must agree on standards for how they will transact and connect with each other. 

  • About the EY Open Banking Opportunity Index

    The EY Open Banking Opportunity Index assesses the conduciveness of open banking to thrive across 10 selected markets. Success is viewed as the potential for consumers to adopt open banking-enabled services within a market.

    Our model uses a wide range of measures — 22 indicators and 13 sub-indicators — to assess each country’s potential, across four key conditions needed for the success of open banking: regulatory environment; adoption potential; consumer sentiment; and innovation environment. 


There’s no question that the open banking ecosystem in the US is taking shape rapidly as FinTechs continue to innovate, and banks and FinTechs learn how to partner effectively to serve bank customers. 

About this article

By EY Global

Multidisciplinary professional services organization