The course of open banking is shifting fast, driven by new or altered regulations, evolving consumer expectations, and competitive pressure from fintechs and larger banks.
For regional and community financial institutions, this isn’t just about compliance—it’s an opportunity.
Regulatory Crossroads
The Consumer Financial Protection Bureau’s (CFPB) Section 1033 rule, finalized in late 2024, was the catalyst. It legally mandates that financial institutions enable consumer-authorized data sharing through secure Application Programming Interfaces (APIs), pushing the U.S. closer to a structured open banking framework.
But the regulatory story took a sharp turn in mid-2025. The CFPB, under new leadership, filed to amend or possibly roll back the rule amid lawsuits and political pressure, citing concerns raised by industry groups over data security, third-party liability, and implementation costs. That was followed by the bureau’s advance notice of proposed rulemaking regarding a revamped 1033, and then a deal that could help pave a path for cooperation.
Amid these developments, the broader push toward open banking remains intact. While the future is uncertain, the message is clear: financial institutions must be ready for a data-sharing economy, regardless of where the law ultimately lands.
What This Means for Financial Institutions
Compliance is the floor, not the ceiling. And even with regulatory uncertainty, market forces are pulling the industry toward greater data openness. The real question is: How can institutions turn mandated interoperability into strategic advantage?
- Enhanced User Control and Transparency
Consumers are demanding more control over their financial lives. Open banking enables them to share data with applications (apps), services, and platforms of their choice—without resorting to insecure practices like screen scraping. This shift builds trust and strengthens relationships.
- Real-Time, Personalized Experiences
Financial institutions can deliver dynamic, hyperpersonalized experiences to each account holder and tailor offers that anticipate consumers’ needs based on their transaction history and financial behaviors. This isn’t futuristic, it’s happeningnow in institutions using account holder data to enhance digital banking solutions.
- Competitive Differentiation Against Megabanks and Fintechs
Open banking levels the playing field. Regional and community institutions can partner with fintechs to deliver capabilities that rival or surpass those of larger competitors. APIs enable modular, scalable innovation.
- Smarter Compliance and Risk Management
With adaptive risk-based scoring, institutions can manage fraud and credit risk more dynamically. For instance, new account holders flagged for potential fraud can have their functionality limited until verified, while trusted users receive full access from day one.
- Ecosystem Expansion and Embedded Finance
Open banking also allows institutions to embed financial services into non-bank environments. Picture small business owners accessing loans directly within their accounting software, or account holders activating cards from within retail loyalty apps.
What to Watch: Uncertainties and Opportunities
While the CFPB’s proposed amendments could delay or reshape Section 1033, other forces are accelerating open banking:
» Artificial Intelligence (AI) and Personalization: With AI-driven models emerging, open banking data fuels opportunities for smarter personalization.
» State-Level Activity: Some states are considering their own financial data rights legislation, further incentivizing institutions to act sooner.
» Global Precedent: The EU, UK, and Australia have implemented open banking—with measurable benefits in innovation and satisfaction.
The Strategic Imperative
Open banking is more than a regulatory change; it’s a market transformation. The financial institutions that will win in this environment aren’t necessarily the biggest, they’re the most adaptive.
Open banking allows regional and community institutions to compete in ways they never could before. But it also demands a shift in mindset: from owning the data to enabling its movement; from protecting the status quo to building for the future.
In research conducted by PYMNTS, 46% of consumers were “highly willing” to use open banking for payments and financial services, “yet only 11% have done so, leaving 89% of the market untapped.”
In a recent survey we here at Alkami conducted, 50% felt neutral or had no strong opinion about the recent updates that have delayed or paused the implementation of open banking regulation in the U.S.
Diving deeper, if open banking were to move forward in the future, 43% said their institution would need the most help with ensuring compliance with regulatory and security requirements to be ready to embrace it. The second most common response was the 36% of financial institution leaders who said they would need support in improving their digital banking experience to retain accountholders who may be more tempted to switch financial providers.
However, open banking is not about giving consumers more chances to leave. It’s about providing more opportunities for financial institutions to deepen banking relationships.
Think of open banking this way: When visiting a primary care doctor, a patient’s medical history stays within that provider’s office. But if they need to see a specialist, they give permission for their records to be shared—securely and at no cost to them. That’s exactly what open banking does for financial data. The consumer decides who gets access. Whether it’s a payments app or another financial provider, their institution is required to share their data securely when requested. This opens up a new, competitive marketplace for financial services, where choice and convenience are in consumers’ hands.
Mandate to Momentum
The industry is moving toward a future where data is fluid, partnerships are open, and the winners are those who use insights to create real value. Regardless of Section 1033’s final language, the direction is set. Consumers are demanding more control. Fintechs are pushing the boundaries. And leading institutions are already building for this reality. The winners will be those who leverage data to deliver meaningful, personalized, and integrated experiences.
The future of open banking is about strategy, agility, and the boldness to lead. It’s also about anticipating the needs of account holders before they even arise—a principle at the heart of Anticipatory Banking. And it’s already underway. The only question is: who will be ready?
¹Alkami Proprietary Research – Surveyed 150 digital banking platform decision makers/influencers. Data collected June 2, 2025–June 22, 2025.
Dennis Irwin is VP, Chief Compliance Officer at Alkami.
