Small Banks Brace for Big Bills in Open Banking Reset

With the Consumer Financial Protection Bureau reopening its open banking rule under Section 1033, the central questions over who pays for what data and how much it will cost banks and FinTechs will spark ferocious debate.

The CFPB issued an advance notice of proposed rulemaking (ANPR) to reconsider its 2024 open banking rule. This action launched a 60-day public comment period, expected to close by mid-October. Stakeholders, from community credit unions to national banks and FinTech firms, are now invited to offer input on cost recovery models, data-sharing timelines, reauthorization schedules and the ways in which security of data would be improved.

The CFPB is requesting granular feedback on fixed and marginal cost modeling. Fixed costs, such as building APIs, standardizing data formats and deploying secure authorization systems, can range markedly.

Small financial institutions in the United States may face costs tied to open banking that depress profitability, as discussed in the June paper “Global perspectives on open banking: Regulatory impacts and market response” published in the Journal of International Financial Markets, Institutions and Money.

Meanwhile, the paper “Do Banking Regulations Disproportionately Impact Smaller Community Banks?” by an economist with the Conference of State Bank Supervisors estimated that compliance costs are a higher burden for small financial institutions versus their larger brethren.

The CFPB wants detailed evidence on balancing benefits with risks.

“One unfortunate byproduct of the transition to a largely digital information architecture is the increased number of threat vectors to the secure storage and transmission of data,” the ANPR said.

Cost recovery models are also under review. Having barred fees in its prior rule, the CFPB looks set to entertain different fee models. United Kingdom and European Union models often reflect blended approaches. Commercial framework, for example, aims to incentivize issuance of value-added services alongside basic access, according to an April report by UK Finance.

As with cost models, feedback will also access timelines and reauthorization protocols. The current rule mandates annual consumer consent renewal.

In the meantime, and as PYMNTS Intelligence has detailed, there may be an ancillary revenue stream that could conceivably help offset the costs of cementing open banking within financial services.

The PYMNTS Intelligence report “Consumer Sentiment About Open Banking Payments” found that 46% of banking customers are highly interested in using open banking options, yet only 11% had real-world experience with open banking payments in the last year. The emergence of faster payment infrastructure and instant payments sent in bank-to-bank fund flows (with third-party providers in the mix) comes as PYMNTS Intelligence also found that about 40% of users are willing to pay for instant access.

Large banks must now assess whether multiyear, multimillion-dollar API systems are justified, while small institutions may grapple with steep relative burdens. JPMorgan, for example, is pivoting to a fee-for-access model. FinTechs are advocating for flexibility and affordability, while regulators must balance market momentum with fair cost sharing.

With the comment period closing in October, these coming weeks will shape not only policy but also how the financial industry divides the bill for consumer data access.

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