Open Data, Open Banking: Creating a More Competitive Financial Services Ecosystem

Panel Overview and Context

• The panel, moderated by Melissa Coit of FinReg Lab, examines open banking, data underwriting, and the tension between technology-driven innovation and regulatory frameworks.
• Participants represent a global ecosystem: Craig Schachter (Finastra), Sahil Kinney (Setu, India), Seema Gandhi (Plaid, US), and Gilles Gâte (CrossRiver, US).
• A central debate exists regarding whether open banking is driven by top-down policy (e.g., UK's PSD2, EU directives) or bottom-up market demand and technology.

Consumer Data Ownership and Control

• Panelists agreed that data ownership fundamentally belongs to the consumer, though legal and business models often treat banks as custodians.
• Seema Gandhi noted that 70% of consumers believe they own their data, but only 30% feel they have actual control, highlighting a perception gap.
• Plaid introduced a standardized "Link" consent interface to ensure consumers understand exactly what data is shared and how it is used, improving user adoption and conversion rates.
• Gilles Gâte emphasized that liability generally resides with the bank as the fiduciary party, yet this creates a disincentive for banks to share data without clear monetization models.
• Craig Schachter argued against the "monetization to death" mindset, suggesting banks should focus on improving products to retain consumers rather than selling data directly.

Technology: APIs vs. Screen Scraping

• While APIs are viewed as the modern standard, Sahil Kinney and Gilles Gâte noted that screen scraping remains a functional method for data aggregation in markets where API adoption is low or banks lack modern infrastructure.
• The consensus is that the technology (API or scraping) is secondary to the outcome: transparent consumer consent and unrestricted data flow.
• Gilles Gâte highlighted that core banking processors often operate on batch systems rather than real-time, hindering the ability of fintechs to offer instant, data-driven financial decisions.
• CrossRiver built its own real-time core banking platform to bypass legacy processor limitations and enable real-time API access for partners like Coinbase and Google Wallet.

Regional Regulatory Landscapes

• India: Regarded by panelists as a global leader in digital public infrastructure due to Aadhaar (1.1 billion enrolled) and the Unified Payments Interface (UPI), which processes 800 million monthly transactions.
• US: Characterized as a "principle-based" approach where technology (e.g., Plaid) often outpaces regulation; the US lacks a unified federal open banking mandate, leading to a fragmented regulatory environment with 12 federal and 50 state regulators.
• UK/EU: Described as "slow followers" or "regulatory leaders" depending on the metric; the UK's open banking agenda is policy-driven with specific technical standards, which some argue stifles innovation compared to the US's flexible approach.
• Singapore: Identified by Finastra as a regulatory leader in the APAC region regarding open banking readiness.

Market Dynamics and Consolidation

• Community banks (85% of US banks have assets under $500 million) face existential threats from non-bank fintechs and large consolidating banks, yet many lack the resources to upgrade legacy core systems.
• Consolidation in core processing (e.g., WorldPay, Fiserv, FIS) is noted, with concerns that incumbents may resist real-time data sharing to protect legacy revenue models.
• Craig Schachter suggested Finastra is differentiating itself by "unlocking" legacy cores via APIs to help smaller banks integrate with fintechs.
• Gilles Gâte warned that excessive market concentration (referencing Brazil's top four banks holding 90% of deposits) can lead to cartelization, higher fees, and reduced consumer welfare.

India's Open Banking Model (Setu)

• Sahil Kinney described a strategy of "unbundling" banking into modular primitives (CRUD operations on stored value accounts, addressing, authentication, authorization) to enable any company to build financial products.
• The model focuses on "need states" for diverse cohorts (e.g., farmers, artisans) rather than a one-size-fits-all approach, allowing for tailored credit and insurance products.
• Consent mechanisms in India are designed for low-literacy and low-English-speaking populations, utilizing voice and vernacular interfaces rather than text-heavy screens.
• The Indian government adopted a "data fiduciary" framework, treating those holding data as having strict responsibilities to protect the citizen, inspired by global precedents like GDPR but adapted for local context.

Future Outlook and Policy Recommendations

• The panelists called for clarifying consumer rights to data ownership, potentially through the modernization of Regulation 1033 or new federal legislation.
• Gilles Gâte and Seema Gandhi agreed that while regulations are necessary to ensure consumer protection and liability clarity, they must not dictate specific technology standards to avoid stifling innovation.
• Sahil Kinney argued that market forces alone in India were insufficient to reach the underserved; public infrastructure (Aadhaar/UPI) was a prerequisite for private sector financial inclusion.
• Finastra and Plaid indicated they are developing frameworks to assist banks, particularly smaller ones, in embracing open banking to prevent disruption by non-bank entities.
• The group warned that without resolving liability and data flow issues, the full potential of cash-flow underwriting and personalized financial services cannot be realized.