In October, the US financial services sector saw the implementation of Regulation 1033. This marked a monumental step towards embracing open banking. Issued by the Consumer Financial Protection Bureau (CFPB), this new regulation introduces a framework that provides consumers with control over who can access their personal financial data. This type of regulation, already established in parts of Europe through PSD2, aims to spark innovation, encourage healthy competition, and enhance financial product offerings in the United States.

During a recent discussion, two of Keeper Solutions leadership team, Stephen Walsh and Tommy Marshall, explored the nuances of Regulation 1033 and its potential implications for FinTech firms. The main takeaway from their conversation was how this regulation will transform the way financial products are developed and delivered, particularly for FinTech companies.

As businesses look to innovate with open banking, understanding the opportunities and challenges presented by 1033 is critical.

In this piece, we delve into the key insights shared during the discussion and explore how FinTechs can thrive in the world of open banking. 

1. Understanding the Core of Regulation 1033: Consumer Data Rights

At the heart of Regulation 1033 is the belief that consumers should have greater control over their personal financial data. This rule allows individuals and small businesses the right to share their financial data with third-party applications they trust. On a practical level, customers now have the autonomy to grant access to their transaction histories, balances, and recurring payments to fintech companies or other financial institutions.

For FinTech firms, this opens the door to real-time, permissioned data access, which lays the foundation for a wide variety of new financial products and services. Whether developing budgeting tools, credit-scoring systems, or account-switching platforms, the ability to access accurate and up-to-date financial data is indispensable.

FinTech advisor, Tommy Marshall, pointed out that this type of data access can “bring higher transparency and trust into financial products,” enabling more personalized and efficient solutions that serve individual needs.

Relevant insight for FinTech firms:

This regulation levels the playing field, providing FinTech start-ups with data access that was previously limited to larger institutions. By leveraging this data, FinTech start-ups can focus on creating highly tailored products that anticipate consumer needs, whether through financial education tools, lending platforms, or automated payment solutions.

2. The Transition from Screen Scraping to Secure API Access

Historically, FinTech firms in the US have relied on screen scraping to gather user data. Screen scraping, which involves accessing data by mimicking user actions, has often been criticized for its security risks and inefficiency. With Regulation 1033, there’s a move toward more secure, standardized API access, which banks and financial institutions are now required to implement.

As Stephen Walsh noted: “This new regulation effectively marks the end of screen scraping…it’s about streamlining how data is shared between banks and FinTechs through permissioned APIs.”

Why is this significant?

APIs (Application Programming Interfaces) provide a more secure and efficient way for FinTechs to fetch user financial data. This means seamless connectivity, less risk, and more trustworthy interactions between users and financial services. Moreover, it eliminates one of the significant concerns FinTechs have faced in the past: regulatory scrutiny around security and privacy when handling consumer data through less secure methods.

For FinTech firms, this transition opens the opportunity to develop more efficient data ecosystems. By integrating with API systems, FinTech products can retrieve real-time data securely, enabling faster transactions, more accurate account updates, and a smoother user experience.

Relevant insight for FinTech firms:

If your business has been relying on screen-scraping methods, now is the time to pivot to API integration. APIs will help FinTech firms provide more sophisticated products with a stronger emphasis on security and privacy. Focusing on the development of seamless, API-driven data exchange will be crucial to maintaining competitiveness in the landscape of open banking.

3. Innovating with Open Banking: FinTech Opportunities Under 1033

Perhaps the greatest impact of Regulation 1033 will be its ability to drive innovation in financial services. During the discussion, both Stephen Walsh and Tommy Marshall repeatedly underscored the possibilities that open banking brings to FinTech firms.

Key FinTech Opportunities to Explore:

                      • Cash-Flow Based Lending:
                        Marshall highlighted that one of the most promising applications of 1033 is its potential to unlock cash-flow underwriting , particularly for small businesses. Rather than just relying on static credit scores, fintech companies can use real-time transaction histories to generate dynamic risk profiles. As Marshall noted, “accessing cash-flow data could allow FinTech firms to offer better loan products to small businesses.” This is particularly relevant for firms that are looking to offer financial services to growing enterprises.
                      • Embedded Finance & Payment Services:
                        Additionally, the rule could pave the way for greater adoption of pay-by-bank schemes. This would enable FinTech firms to build products that allow direct payments from customer bank accounts, bypassing credit card networks and enabling lower-cost, high-efficiency transactions, an area ripe for disruption. “If this rule enables new payment flows at a reduced cost, FinTech firms could have a strong hand in driving adoption,” suggested Walsh during the conversation.
                      • Bank Account Switching & Consumer Flexibility:
                        One of the more consumer-facing innovations fueled by Regulation 1033 could be account-switching tools. Keeper Solutions Founder, Stephen Walsh, pointed out that many consumers stay locked in with their banks due to the complexity and hassle of switching, particularly moving recurring payments. Open banking under 1033 allows FinTech firms to develop solutions that make it easy for customers to switch banks. While the UK’s open banking regulations didn’t produce the anticipated spike in account-switching, the evolving US FinTech market, with its focus on embedded finance, could see different outcomes.
Relevant insight for FinTech firms:

The era of open finance is here, and FinTechs should be looking to innovate right now. Whether it’s targeted cash-flow lending for small businesses or building APIs into platforms for seamless payment automation, the future competitiveness of your FinTech firm depends on how creatively—and securely—you leverage permissioned data.

Financial software development cash

Challenges and Considerations: Navigating Complexity

Although 1033 introduces a wealth of opportunities, the road ahead isn’t without challenges. One potential friction point, as noted by Marshall, could be interbank competition , especially with big banks showing reservations about the rule. “There’s a risk that authorization processes could slow things down, particularly in the competitive space.”

Furthermore, FinTech companies also need to keep in mind regulatory compliance as they move forward in accessing and utilizing consumer data. Banks have significant obligations to ensure that data access remains secure, and FinTech firms must comply with stringent security and privacy standards set by both regulatory bodies and the financial institutions providing the APIs.

Relevant insight for FinTech firms:

FinTech companies need to be prepared for some initial friction regarding data access and bank cooperation, especially where larger financial institutions are concerned. Ensuring compliance with regulatory requirements will be crucial, so addressing legal and security matters early during product development will prevent potential roadblocks.

The Road Ahead for FinTech Firms

Regulation 1033 marks an exciting turning point for FinTech innovation in the U.S. By enabling consumers to share their data with trusted third parties and fostering greater collaboration between FinTech firms and traditional financial institutions, the regulation presents a wide range of new opportunities.

However, these advancements will require fintechs to evolve their technical strategies quickly—focusing on secure API access, compliance with regulatory demands, and offering value-driven innovations that can capitalize on the newfound openness of the financial data ecosystem.

For FinTech companies, the time to innovate is now. As Stephen Walsh aptly summarized, “FinTechs need to explore how open banking will play a part in their future products. With regulation 1033, the tools are finally at our disposal.”

By staying informed about the regulation, collaborating with stakeholders, and investing in compliant, secure API solutions, FinTech companies can harness the power of open banking to not only meet market demands but shape the future of U.S. financial services.