Sumner Francisco, Head of Pay by Bank at BNY, explores how open banking is transforming payments in the U.S. – and what comes next for regulation and adoption
Consumers increasingly expect fast, intuitive service that mirrors the real-time interactions of everyday life. To meet this demand, the U.S. payments landscape is undergoing a broad digital transformation – moving away from legacy, paper-based processes such as checks toward modern, API-driven solutions.
One key enabler of this shift is open banking, a framework that allows consumers to securely share financial data with authorized third parties. This breakthrough is reshaping how consumers and businesses access and exchange financial information and, in turn, how money moves.
By connecting directly to users’ financial data – with their consent – institutions can streamline onboarding, account linking and payment initiation. The model offers consumers greater control and convenience, while helping businesses deliver faster, more secure and more cost-effective payment experiences.
As more institutions adopt open banking, the focus is increasingly on the frameworks that will sustain it – and whether these will be shaped by regulators or driven by the market.
A shifting regulatory landscape
Although open banking’s roots in the U.S. are market-driven, regulation has begun to play a more significant role. In November 2024, the Consumer Financial Protection Bureau (CFPB) issued its Personal Financial Data Rights Rule, implementing Section 1033 of the Dodd-Frank Act, which gives consumers greater control over their financial information.
Since then, however, questions have grown over how – and even whether – the rule will proceed in its current form. The CFPB has reopened consultation through an Advanced Notice of Proposed Rulemaking (ANPR), signaling a potential recalibration of its approach to consumer-authorized data sharing. The review will consider who can access consumer financial data, how costs and responsibilities are allocated and how privacy and security can best be protected.1
It now appears that if the rule does move forward, its scope will be narrower than initially envisioned. While this introduces more uncertainty to the regulatory trajectory of open banking in the U.S., the overall impact is likely to be limited. The foundations of open banking have been laid through market-led initiatives for several years, as the industry continues to advance shared goals of secure data sharing, greater transparency and an improved user experience – supported by a growing number of tangible use cases.
Three use cases defining open banking
Because of its flexibility, open banking applications span a wide range of industries and payment types. Three categories, however, stand out for their current and potential impact:
1. One-time payments. Open banking-enabled “Pay by Bank” transactions allow consumers to make one-off payments directly from their bank accounts – a cost-effective alternative to traditional card payments. By leveraging existing ACH rails – and with the added security of multi-factor authentication (MFA) – merchants can reduce interchange costs and settlement risks while offering customers a seamless checkout experience. The benefits extend beyond e-commerce: at the point-of-sale, for instance, a shopper can complete a grocery purchase using convenient options like Near Field Communication (NFC) or by scanning a QR code – enabling secure, frictionless account-to-account settlement.
2. Recurring payments. Open banking can also improve recurring transactions for billers and subscription services. Instead of entering routing and account details manually, enrolling customers can link their payment accounts in seconds by logging into their existing online banking portal – a familiar, secure step often supported by multi-factor authentication – to authorize data sharing. The biller then retrieves the necessary payment details directly, eliminating manual entry and creating a seamless, low-touch onboarding experience aligned with modern digital expectations.
3. Account funding for investments. In the brokerage and wealth management sectors, open banking connectivity simplifies account funding processes. Similar to the use case for recurring payments, open banking allows customers to seamlessly link external bank accounts without manual data entry, accelerating the onboarding process and allowing users to put their cash to work faster.
BNY’s Bankify solutions can help provide cost-effective and seamless payment services. Bankify was designed to offer an alternative to fees that are associated with card payment methods and make it easier for your customers to pay using their bank account. Settlement guarantees for ACH returns – unique to Bankify – can help mitigate settlement and fraud risk. Bankify can also help boost your account creation and user-onboarding processes through consumer-permissioned data.
The way forward
The direction of travel is clear. Propelled by customer demand and a compelling use cases, open banking is on the rise in the U.S., where it is meeting growing expectations for intuitive, secure and immediate digital services. While imminent regulatory changes may accelerate adoption and standardization, the market is likely to remain the primary driver of open banking.