As governor of the automated clearing house (ACH) Network that moves $80 trillion in funds electronically each year, U.S. payments industry association Nacha has been moving payments forward for 50 years. In recognition of the tremendous, data-driven changes shaping the industry in just the last few years, Nacha updated the categories for its Preferred Partner Program.

Nacha selects Preferred Partners, including Mastercard, whose payments technology offerings align with Nacha’s network advancement strategy. Mastercard Open Banking services are provided by Finicity, which has been a Nacha preferred partner in all partner solutions categories — previously defined as Compliance, Risk and Fraud Prevention, and ACH Experience — since 2020.

Going forward, Mastercard will continue to provide advanced, secure and trusted payment solutions as a Nacha Preferred Partner in three key areas: Risk and Fraud Prevention, as well as new categories Account Validation and Open Banking. These solutions are integral to the future of digital payments.

The power of consumer-permissioned data

Account-to-account (A2A) consumer bill payments and transfers totaled $9 trillion in 2023, and continue to grow at a 7% compound annual rate, according to Nacha, driven by consumers’ choice for fast and convenient payment options. Failed payments and fraudulent charges can be costly and take time to resolve. So it’s critically important to protect A2A payments with insights and analytics that keep risk and cost to a minimum.

Ensuring secure and successful digital payments starts with a robust account validation process to verify critical details like account type, ownership and balance information. These solutions not only help optimize payments, reduce risk and lower costs for fintechs and merchants, they enable the safe and seamless payment experiences that end users demand. Mastercard Open Banking for Payments solutions include:

• Account Owner +: Verify identity by analyzing risk signals, insights and scores related to personal information, device details and IP addresses.
• Account Payment Details: Retrieves account and routing numbers and indicates real-time payment availability.
• Balances: Gathers insights from cleared and available balances and time stamps, with a dynamic recency setting.
• Payment Success Indicator: De-risks payments with predictive insights from a weighted, multifactor settlement risk score.

Mastercard’s advanced global network and decades of experience in risk and fraud prevention can help fintechs and merchants make smarter decisions in a fast-moving digital payments landscape. Ultimately, we strive to help our customers, partners and end users realize all the benefits of next-generation A2A payment technologies with the lowest possible risk.

To learn more about Mastercard Open Banking for Payments, click here.

When banking, fintech and finance leaders gather in New York at one of the leading fintech conferences, FinovateFall, on September 9-11, two broad topics will dominate the agenda: how new regulations and the proliferation of behavioral data is enabling the age of open banking, and how artificial intelligence (AI) and machine learning can accelerate new product development, improve the customer experience and boost profits. 

Just as we expect streaming entertainment apps to offer us personalized choices, consumers and businesses today demand more digital, personalized services from their financial institutions. For decades, banks and financial institutions operated on closed ecosystems: in-person relationships were key, data was sequestered in core banking and card systems, and third-party data came from credit bureaus.  

That’s been changing recently as more businesses and consumers embrace open banking, both in response to fintech innovation and evolving data and privacy regulations. Today, application programming interfaces (APIs) enable third parties to offer services that complement bank services. In addition, new rules give consumers more control over their data and its use. These circumstances are combining to fuel a revolution in financial services. 

A critical topic at FinovateFall will be how financial institutions can adapt to new Consumer Financial Protection Bureau (CFPB) rules, expected to be finalized in the coming months. The new regulations will formally establish the U.S. rules for open banking. Mastercard’s Head of Data Access and Business Development for Open Banking Ben Soccorsy will speak about how all this paves the way for a bold open banking future, discussing the opportunities posed by the new rules and how banks should address them to become a data recipient,  enhance customer experience, drive innovation and, ultimately, boost profits. 

New research emphasizes the importance of open banking  

Both businesses and consumers have welcomed open banking. According to a forthcoming global Mastercard research report set to be published in September 2024, embracing open banking will be crucial to both business-to-business partnerships and maintaining consumer relationships. Among B2B survey respondents, 92% said using AI to safeguard consumer data and streamline processes is an important consideration when selecting open banking partners. Businesses also hope that open banking can improve their profitability (69%), boost their revenue (66%) and increase productivity/efficiency (65%). 

Mastercard’s Senior Vice President for Open Banking Network Services Ryan Beaudry also speaks at FinovateFall, discussing how AI and machine learning can improve such things as account-to-account payments. That’s crucial because 80% of U.S. consumers already link their financial accounts and 66% are likely to connect their bank accounts to an app or service in the future, according to the 2024 Mastercard survey.  

The same survey also found that how financial institutions handle data and open banking is important to consumers. Indeed, many of the features that attract U.S. consumers to engage with a financial services company—efficiency, convenience, security and privacy—are driving open banking innovations.  

Asked to name the top considerations when choosing which financial institutions to do business with, more than 90% of consumers said their top four priorities were: keeping their data secure, a convenient customer experience, greater control over how their data is used, and the ability to process transactions quickly.  

Once again, FinovateFall brings together thousands of senior decision-makers from financial institutions, fintechs and the investing community. With consumers and businesses becoming more digitally savvy and hungry for new innovations in how they interact with their finances, start-ups and public companies alike will show off their latest products and innovations.  

As keynote speaker and customer experience strategist Ken Hughes said ahead of the conference, “We are in a perfect storm of change, and we need to ensure that the financial services of today are fit for the customer of tomorrow.” 

If you’re at FinovateFall yourself, make sure to meet up with our open banking experts or reach out to them directly with any questions about your open banking opportunities. You can also visit our home for everything open banking and deep dive into some of our inspirational use cases.  

In today’s rapidly evolving digital landscape, consumer preferences and expectations are reshaping the way we engage with financial transactions. Choice lies at the heart of consumers’ financial lives, including how they pay their bills — from traditional methods like checks and cards to emerging technologies like account-to-account payments.  

To understand how consumers prefer to pay their bills and why, and how they want to do so in the future, Mastercard surveyed over 2,000 consumers across the U.S. We explored the evolving landscape of consumer payment preferences, focusing specifically on the intersection of choice, convenience, and security, and how these core tenets will shape the future of bill payment.  

Explore some of the highlights of the report below or download the full report here. 

An overview of bill payments and preferences  

Consumers are looking for a seamless, efficient, secure way to pay their everyday expenses. The research shows that they are consistently turning to credit and debit cards, as well as options where they can pay directly from their bank accounts, like Bill Pay and ACH/e-check options.   

The most often used payment method for recurring bills is topped by credit cards at 47% followed by bill pay features through banks at 41%, debit card at 39% and ACH at 37%.  

Looking forward, respondents are inclined towards similar payment methods for future recurring bills, with credit cards and bill-pay-by-bank features leading the way. This trend underscores the reliability and trust needed for recurring expenses. 

Consumers are driven by choice  

Consumers want three fundamental things in their payment experiences: choice, convenience, and security, and they want payment solutions that empower these elements.   

Placing high value on having choice and flexibility in payment methods when paying their bills, an overwhelming number of respondents expect businesses to provide multiple payment options, indicating a strong demand for variety in how they pay.    

However, only 51% of respondents feel they are frequently given the opportunity to choose their preferred payment method. This suggests a sizable gap in businesses meeting these expectations consistently.  

Convenience, cost and security pave the way for open banking  

Based on the data, there is a clear opportunity for more businesses to embrace new kinds of payment methods supported by open banking technology.  

These new methods use consumer-permissioned connections to bank accounts for payment data rather than having the consumer input their card or account and routing numbers.  

The majority of consumers, across all age groups, are open to new pay-by-bank methods that would save billers money and reduce the likelihood of non-sufficient fund returns – as well as offering security, convenience, and support for consumers to manage their finances.  

Download the bill payments report to learn more about how open banking increases choice in bill payments for consumers and businesses, or head over to our open banking blog for inspirational use cases and insights. 

In this webinar from April 24, 2024 Tom Carpenter, Senior Vice President of Industry, Policy and Standards Engagement from Mastercard, along with panelists from Sidley and i2c, discussed the potential of CFPB Section 1033 for open banking initiatives with banks. 

They discussed how banks can leverage data sharing to enhance customer experiences, create new product offerings and navigate competition from fintechs. You will also learn about the opportunities represented by the rule and how to develop strategies to capitalize on the evolving landscape. 

Find out why the CFPB Section 1033 rule is crucial in advancing open banking, any potential risks associated with the rulemaking, best practices for compliance with Section 1033 and new opportunities to leverage data sharing to innovate and offer new services. 

You can watch the webinar here. 

In this webinar with the Consumer Bankers Association from April 25, 2024, Mastercard’s Ben Soccorsy and Jenny Ziegler tackled the impact open banking regulation will have on banks and the opportunity having a regulated ecosystem provides. 

From the basics of open banking data and how consumers can access their data from any of their financial institutions to the way that data can be used for lending, financial management, wealth management, and payments. 

You can learn how the regulatory environment is accelerating the shift towards open banking. CFPB Dodd Frank Section 1033 is intended to break down barriers to accessing financial products, jump-start competition between financial institutions and fintechs and provide consumers more control and access to their financial data. 

Regulation will mandate that data providers must share their financial data with third parties or consumers via APIs safely and securely. The compliance deadline varies depending on the size of the financial institution. 

For banks, this means being on top of API enablement, consent management, information security, third party risk management, risk and compliance, data governance and data monetization strategies. 

You can watch the webinar here. 

An explosion in new financial services experiences, powered by fintech apps for consumers and small businesses, has propelled the rise of open banking technology in the U.S. and around the world. Every player in the consumer finance arena must now rethink what is possible when consumers and small businesses have full control of their financial lives. 

The Consumer Financial Protection Bureau (CFPB) is embracing this moment of innovation with the long-awaited Dodd-Frank Section 1033 open banking rule, which will accelerate the adoption of open banking technologies and protect consumer interests as we move further into the digital future. This proposed rule is set to be finalized in the second half of 2024. With decades of leadership in data responsibility, Mastercard’s principles align with the tenets of CFPB rulemaking and our role is to protect this data.

Mastercard has created this primer to outline the provisions of CFPB Section 1033 and explain how banks, fintechs and other holders of consumer financial data will be affected by the proposed rule. Read on to discover what CFPB 1033 rulemaking means for you — and how Mastercard equips customers to thrive in this new landscape. 

Index

1. What is the CFPB?
2. What does the Dodd-Frank Act Section 1033 say about consumers’ rights to access financial data?
3. What is the CFPB’s role in Section 1033 rulemaking?
4. What parties are impacted by the CFPB Section 1033?
5. How does the proposed rulemaking impact personal financial data rights?
6. What types of data are covered by the CFPB open banking rule? 
7. When does the open banking regulation take effect? 
8. How can Mastercard help? 
9. Where can I learn more?
   
   

What is the CFPB? 

The Consumer Financial Protection Bureau is an independent agency of the United States federal government, established in the wake of the 2007-2008 financial crisis to protect consumers’ interests in financial markets and promote long-term stability in the broader economy.  

The CFPB was created under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, better known as Dodd-Frank, to provide a single point of accountability for protecting consumers from unfair, deceptive or abusive financial practices and to taking action against companies that break the law. 

What does the Dodd-Frank Act Section 1033 say about consumers’ rights to access financial data? 

Section 1033 of the Dodd-Frank Act establishes consumers’ right to access financial data associated with the financial products and services they use, such as credit cards, deposits and savings accounts.  This data includes account details, transactions, balances and more (see “What types of data are covered by the CFPB open banking rule?” below), and is subject to rules put forward by the CFPB.  

What is the CFPB’s role in Section 1033 rulemaking? 

Section 1033 gives the CFPB authority to issue rules governing personal financial data rights.  The CFPB has been working toward implementing this rulemaking since 2016.  

Some key milestones include: 

• publishing a set of consumer protection principles (2017) 
• holding a symposium on consumer access to financial records (2020) 
• releasing detailed documentation of rulemaking proposals and alternatives under consideration (2022) 
• convening a Small Business Review Panel and issuing a report of its findings (2023) 

In October 2023, the bureau released its proposed rule and opened a period of public comment through December 29, 2023. Since then, the CFPB has been working to finalize the written regulations. Once it takes effect, the proposed rule will serve as implementation of Dodd-Frank Section 1033.  

What parties are impacted by the CFPB Section 1033? 

• Data providers – financial institutions and some payment facilitators
• Third-party data recipients – fintechs and financial institutions acting on consumers’ behalf as data recipients and data aggregators acting on their behalf
• Qualified industry standard-setting bodies – CFPB-recognized issuers of fair, open, and inclusive industry standards
  

How does the proposed rulemaking impact personal financial data rights? 

Broadly speaking, the CFPB open banking rule is a framework of regulations and industry standards that provides consumers with ownership and rights to control their financial data; enhanced consumer protections; and consistency in how data can be accessed and used.  

The CFPB proposal will require financial institutions and some payment facilitators to make financial data available to consumers and authorized third-party data recipients.  

The proposed rule also: 

• outlines obligations and limitations for how companies must collect, use and store consumer data  
• requires banks to share data in a standardized format via safe and secure application programming interfaces (APIs) 
• seeks to empower consumers with their financial data 
• enables better access to financial products 
• and jump-starts competition between banks of all sizes, fintechs and other digital players 
  

What types of data are covered by the CFPB open banking rule? 

• Transaction information, including amounts, dates, payees, historical data, and fees. 
• Account balances 
• Account and routing numbers, both tokenized and non-tokenized 
• Terms and conditions, including fee schedules, rates, rewards terms and overdraft coverage 
• Information on upcoming bills, such as minimum payment amounts
• Basic account verification information, including names, mailing addresses, email addresses, and phone numbers. 
  

When does the open banking regulation take effect? 

While the CFPB hasn’t given an exact date, it has indicated that it will finalize the proposed rule toward the end of 2024, with a tiered compliance timeline to follow, which makes it even more important that financial service providers are prepared for the change. 

• First, the CFPB must finalize the rulemaking. 
  • While the bureau hasn’t given an exact date, CFPB Section 1033 is expected to be finalized in the second half of 2024, most likely in the fall. 
• Third parties must comply within 60 days.  
• For consumer-authorized third parties, the CFPB proposed rule becomes effective 60 days from the date of the final rulemaking.  
  • The proposed timeline for complying with the CFPB rule varies based on the size of the financial institution. Banks and other institutions that hold deposits will have between six months and four years to comply, based on their assets. Non-deposit institutions will have six or 12 months, depending on annual revenue. The CFPB has detailed this tiered approach as follows: 

Source: Consumer Finance Protection Bureau

How can Mastercard help? 

At Mastercard, we believe that consumers own their financial data; they should be in control of how and by whom it is used and should benefit from its use. Mastercard’s role is to protect this data and help data providers do the same.  

The CFPB proposed rule calls for secure permissioned data-sharing across developer interfaces, or APIs. Navigating this compliance is going to be complex, as financial institutions must decide to build APIs on their legacy infrastructure or outsource, as well as addressing other areas, including but not limited to consent management, info security, and third-party risk management.  

As trusted leaders with over 55 years of experience in helping partners navigate regulations and meet compliance, we’re here to guide you in meeting CFPB Section 1033 compliance — and in exceeding your customers’ expectations through new and improved financial experiences — as we shape the future of finance, side by side.  

Where can I learn more? 

Catch up with all of our CFPB content, including webinars, white papers and guides on our CFPB Compliance page or learn more with these:

Orchestrating Open Banking in the US white paper

Understanding and prepping for the pending regulations

Navigating CFPB 1033 open banking regulation – on-demand webinar

Preparing for the future of open banking API standards and the upcoming CFPB 1033 regulation – on-demand webinar

FDX Developer Hub – documentation for FDX-compliant APIs

Today’s consumers’ expectations for their financial interactions are changing. They require a digitally native, seamless, consistent, instantaneous experience with their financial provider right from the get-go. No longer are they willing to wait several days for identity verifications or for microdeposits to clear to start using their account.  

Yet, we know that everyday bad actors are finding new ways to break the system. As more people and businesses enter the digital economy, it’s critical that we keep them secure across all touchpoints with their accounts and beyond. Financial Institutions must protect their customers’ accounts from fraud to ultimately drive primacy, grow deposits and encourage top of wallet behaviors, thus helping them recoup the estimated $450 average cost of acquisition. 

Open banking is the thread connecting the ecosystem to make account opening faster, secure, and more frictionless. 

Here’s a common scenario that financial institutions deal with on a daily basis:  

• ‘John Doe’ opened a new checking account with ‘AcmeBank’ and is ready to fund it with another existing account he has with ‘Partnerbank’  

• How does AcmeBank know that John is the actual owner of the account at Partnerbank? Should Acmebank proceed with posting the ACH file to the Nacha (ACH) network, letting the transaction go through? If John Doe were a bad actor, and Acme bank allowed the payment to go through without doing appropriate checks, John Doe could move that money elsewhere and AcmeBank could get an unauthorized payment return from ‘Partnerbank’, resulting in fraud losses.  

• Similarly, some insurance companies simply ask for account and routing number verification before disbursing funds, not verifying the identity of the receiver. Here, John Doe can impersonate another person, and use his own personal details to re-direct an insurance payout or a payroll disbursement to his account.  

What is the ecosystem doing about it? 

New rules and guidelines are being published by Nacha – operator of ACH payments – that introduce additional risk management frameworks for ACH senders, as well as recipients. Ecosystem participants such as merchants, ecommerce platforms, lenders, and insurance providers may be required to include account verification and identity verification, multi-factor authentication, velocity tracking and KYC/KYB improvements. Mastercard is a Nacha Preferred Partner for Compliance and Risk and Fraud Prevention with a focus on account validation. 

In addition to more thorough fraud checks being conducted by originators, receivers now also must participate in fraud monitoring and flagging to reduce risk. In the above example, Acmebank, the receiving financial institution, will also need to perform additional fraud checks.  

What can you do? 

Mastercard Open Banking helps financial institutions identify, manage and tackle fraud risk on an ongoing basis.  Examples of our solutions include instant account details verification, device and identity verification. When used in conjunction with other customer fraud solutions, they help secure interactions that consumers have with their financial provider. 

Last year, Mastercard debuted Open Banking Identity Verification for the U.S. market and continues to invest in additional functionality that leverage our extensive fraud and identity networks. Before initiating a transaction, financial institutions can verify a number of factors, including: 

• Confirming account ownership information, including name, address, phone and email, in real-time 
• Validating identity profiles and quantifying identity risk  
• Examining the risk level of user activity patterns and associations to detect fraudulent behavior 
• Verifying device authenticity and capturing signals of device fraud 

Beyond Open Banking Identity Verification, Mastercard offers services to streamline account funding, including:  

• Account Owner Verification: A one-time API request that returns the account owner(s) name, address, email and phone number for a select account. This verifies that the bank account being linked is owned by the person opening a new account and complements KYC risk mitigation in real time. 
• Account Detail Verification: Instantly authenticates and verifies account details, including account and routing numbers, to help mitigate fraud, reduce manual entry errors and maximize confidence in payment transactions. 
• Account Balance Check: Easily determines account balance before moving funds to a new account. This ensures that the amount being moved to the new account is available with an accurate, real-time balance snapshot, and reduces costly NSF returns. 
• Payment Success Indicator: A score that predicts a transaction’s likelihood to settle for a specific consumer “today” and up to nine days in the future.  

Now let’s look the journey again with our solutions: 

• Consumer has opened a new checking account with ‘Acme Bank’ and is ready to fund it using existing bank account at ‘Partnerbank’ 
• Consumer agrees to T&Cs and gives permission through Mastercard’s Connect widget for their bank data to be accessed and shared with Acme bank   
• Consumer selects their Partnerbank account and enters banking login credentials (or biometrics where applicable) 
• Consumer selects funding account and amount 
• Acme bank calls our above APIs in the background to check account and identity details in real-time and proceeds with the processing the payment 

Get ahead and get prepared! Check out Mastercard Open Banking developer’s page for technical documentation or reach out to your Mastercard representatives to learn more. 

How is consumer-permissioned data driving the digital evolution in lending? In this video, Mastercard’s Executive Vice President, Open Banking, North America Markets Andy Sheehan and Tearsheet’s Zach Miller get into the details of Mastercard’s lending priorities: inclusion, transparency and security. What do they look like in practice? 

The two discuss Mastercard’s strategy and role in the open banking space, and how Mastercard is building out a new network of consumer-permissioned data as a trusted source for consumers and small businesses. This network works alongside traditional payment networks and identity networks, so that consumers can put their information to work across the ecosystem, accessing the tools to enhance their financial lives.  

Sheehan breaks down how Mastercard is leading the industry in creating next-generation API connections to financial institutions and overlaying its open banking network with Mastercard’s unique capability mix. 

Watch the full session above and learn more about the Mastercard open banking platform. 

Mastercard provides open banking technology to support leading partners across the ecosystem with safe, flexible and secure lending and payments experiences, partnering with leading players across the ecosystem. Our partnerships with Worldpay from FIS, the merchant solutions business of global financial services technology provider FIS, Zip and J.P. Morgan Payments are driving innovation in billing, lending and payment choice as we scale our global network.

Read more here.

J.P. Morgan Payments’ Pay-by-bank solution, which provides billers with the ability to allow their customers to pay bills directly from their bank account, is now live. Leveraging Mastercard’s open banking technology to enhance J.P. Morgan Payments’ ACH capabilities, Pay-by-bank offers payment choice and provides a simple, secure and frictionless experience for billers to offer to their customers.

For consumers, Pay-by-bank elevates the checkout experience, allowing billers to provide their customers with the option for a new, secure way to pay. The solution uses the consumer’s existing authentication protocols with their bank, including technologies such as biometrics, to retrieve all necessary information to execute a payment. As a result, they can securely make payments like rent, utilities, tuition, insurance, and healthcare.

J.P. Morgan Payments is a global leader, processing more than $9 trillion in payments daily, operating in over 160 countries and over 120 currencies.

Read more about this innovative new solution here.