As we head into the new year, we are highlighting a few topics that are top of mind for Mastercard Open Banking, and how we see the Open Banking landscape evolving over the next 12-24 months.  

At a Glance 

• Open Banking adoption continues to gain traction across the globe – This is a result of increased consumer, merchant, and biller appetite, regulations, borrower demand for a digital mortgage experience, and an increase in account-to-account (A2A) payments usage. As momentum accelerates, there is more emphasis on safeguarding consumer information and protecting against fraud in Open Banking.  

• A2A and alternative payment methods are increasing in usage all over the world – Open Banking enables a more seamless A2A experience, particularly in verticals like bill pay, disbursements, and recurring payments. However, there are some barriers that are preventing A2A from scaling.  

• Looking ahead, we see 4 key themes that are rising in importance in Open Banking – We anticipate that Open Banking will unlock opportunities for consumers and businesses to benefit from their data and allow companies to power next-generation personalized financial services by improving the financial experiences of small businesses, leveraging technology such as Generative AI which powers innovative new use cases (e.g., categorization, security/privacy), integrating closely with Real-time Payments (RTP), and enabling value-added services and personalization with the transition to Open Finance.

Mastercard’s strategy is centered on the trends we are seeing, where we think the Open Banking market is headed, and being a valued and trusted partner to our customers by enabling them to provide enhanced financial experiences to their end users. 

What we’re seeing in the market  

• Open Banking is on the rise around the world, driven by different tailwinds. Consumers want more automated and digitized ways to move money, to manage their finances (e.g., by viewing their financial data and unlocking actionable insights), and more transparency and control of their data. They are using Open Banking for topping up their investment accounts, funding their wallets, and applying for mortgages. Regulations, Open Banking players pushing forward innovative solutions, and the desire for seamless, enhanced financial experiences are all drivers of Open Banking. In Europe, Open Banking use is expected to double by 2027 and in the UK, 70% of consumers connect their financial accounts directly to tools to conduct financial tasks. In the U.S., 80% of consumers also already link their financial accounts. Open Banking in Australia is still relatively nascent, but 89% of B2B users report using Open Banking today. Brazil has been a trailblazer in Open Finance – there were 4.8B API calls in June 2023 in Brazil, four times the number of calls in the UK. We are cognizant that as Open Banking matures, more and more markets will adopt and accelerate its usage. At Mastercard, market expansion opportunities are evaluated where there is greatest demand, and we will innovate and test concepts in markets that are maturing. 

• Regulations are changing the landscape for Open Banking. Open Banking regulations are at different stages in key global markets. While Europe and the UK were some of the first to introduce Open Banking regulation with the Payment Services Directive (PSD2) and later, Payment Services Regulation (PSR), other countries around the world are putting their own regulatory frameworks in place. For example, Canada’s Department of Finance (DoF) and the Financial Consumer Agency of Canada (FCAC) are also working on elements of Open Banking regulation in the country. Several countries in Africa are adopting frameworks for Open Banking, and Saudi Arabia and Bahrain are launching innovative measures to test Open Banking solutions. Mexico and Brazil led the way in Latin America in establishing Open Banking regulations, with a particular focus on Open Finance and leveling the playing field between fintech startups and incumbent banks. We will continue to work across the ecosystem to support our customers, consumers and small businesses in navigating regulatory changes. 

• Borrower demand for digital mortgage experiences is increasing. Homebuyers in the U.S. are indicating that they are more interested in leveraging digital channels for mortgages. Those surveyed cited process acceleration (75%) and making the process easier (71%) as the top benefits of a digital mortgage process. Open Banking is key to powering these experiences – it allows lenders to securely collect financial data digitally, conduct more comprehensive assessments of an applicant’s financial health, and make more informed loan decisions. To meet consumer demands and streamline the lending process, Mastercard has collaborated with U.S. government sponsored enterprises (GSEs) such as Fannie Mae and Freddie Mac in connection with certain digital verification of asset, income and employment solutions. These new mortgage solutions are driving more demand for Open Banking and alternative data sources in lending.  

• A2A payment flows are becoming a more common way to pay. While there are multiple payment options available to consumers and businesses today (credit cards, debit cards, BNPL, cash, etc.), A2A payments are the second-most preferred payment choice for bill payment in the U.S. and are increasingly being adopted worldwide. On a global level, A2A payments for e-commerce are expected to grow at a 14% CAGR (compound annual growth rate) through 2027. Government-led schemes for A2A are proliferating its usage in countries including India (Unified Payments Interface), Brazil (PIX) and Thailand (PromptPay). Open Banking-powered A2A payments can transform the A2A experience by making it a seamless and secure way to pay – in particular, we’re seeing Open Banking powered payments pick up in verticals like bill pay, disbursements, recurring payments – where paying by ACH (traditional A2A method) has already been popular in the U.S., for example. Recognizing this market demand, we are partnering with players like JPMC and Worldpay in the U.S. to scale A2A for their customers. We are also continuing to explore innovative solutions that would enable the scaling of A2A globally – for example, Mastercard’s approach to Open Banking helps protect the ecosystem to make OB-enabled A2A payments seamless and secure. 

• Fraud and identity risk are top of mind. While Open Banking will provide new opportunities, like with any exchange of personal data online, there are also risks. As more people use digital channels for financial experiences, there is the possibility for fraudsters to find new ways to attack businesses and consumers. It is estimated that the worldwide costs of cybercrimes will reach $12T in 2025 and 94% of consumers surveyed say that it’s important that financial institutions keep consumer financial data secure. To ensure consumers feel safe using Open Banking and the experiences it powers, fraud mitigation plays a significant role – for example, leveraging identity verification and device intelligence at account opening, multi-factor authentication at sign in¹, and predictive risk signals for payments. At Mastercard, we remain committed to maintaining best-in-class security and data privacy for our Open Banking assets. This is why we are leveraging our rich network of global identity insights and device verification, and integrating them with our Open Banking offering. We believe Open Banking and fraud mitigation will continue to go hand-in-hand as the ecosystem matures.  

Spotlight on A2A Trend 

What are A2A Payments? 

• Account-to-Account (A2A) payments are electronic money transfers from one bank account to another.​ A2A payments can be initiated in two ways, either as a push payment — initiated by the party making the payment — or as a pull payment — initiated by the party collecting the payment. Many consumers already use A2A payments by simply sending money between their own bank accounts or transferring money to someone using platforms like PayPal or Cash App. The 4 main use cases for A2A are Bill Payments, Me2Me, Person to Merchant (P2M), and Person to Person (P2P): 

Growth in A2A is being driven by a number of factors:  

However, A2A payments are still experiencing some challenges to widespread adoption: 

• Suboptimal A2A checkout process:  A2A payment methods have either required consumers to input bank account numbers or login to their bank’s portal for each purchase, which can be time consuming and error prone. In countries where A2A has gotten more traction (e.g., India, Brazil), it has been primarily through QR code which is a suboptimal experience.  

• Inadequate consumer purchase protections compared to card:  Many A2A payment methods lack the same protections that card payments have, and that both consumers and merchants want. 

• Lack of trust: There is a lack of trust from some consumers towards A2A payments, because they have a familiarity with methods like credit and debit payments and are accustomed to their reliability and ubiquity.  
• Lack of scaled use by merchants: Merchants face certain risks with traditional A2A payments, including declines due to insufficient funds, unauthorized returns, etc.  

How does Open Banking enhance A2A?  

Without Open Banking: Traditional A2A is a clunky experience, as consumers need to either initiate bank transfers through their bank account directly or manually enter their banking account and routing number through a suboptimal checkout experience. In some markets, there is also limited transparency in payment settlement timing and risk of payment, for merchants/billers who are offering A2A to their customers. For example, merchants must manually verify customer bank accounts with micro-deposits, and there may be a multiple day delay for a successful A2A payment. Lastly, traditional A2A lacks the rich data insights to verify identity, and to prevent fraud/ non-sufficient funds returns.  

With Open Banking: Open Banking makes A2A payments seamless for consumers. Instead of the error-prone process of finding and manually entering account details – consumers can now leverage the latest technology to easily share their bank data. Powered by Open Banking, A2A payments can be made quickly, with extremely rich insights – such as account owner verification, balance checks, risk indicators, tokenization and fraud signals. In any market, Open Banking makes A2A payments easier, faster, and convenient. Additionally, Open Banking can help in the fight against fraud. For example, when a consumer initiates an account-based payment from their bank account, Mastercard enables account validation to confirm account ownership and validate identity details in real-time through Mastercard Open Banking, drawing on the safe exchange of consumer-permissioned data to facilitate frictionless and secure payments. 

Illustrative US A2A Payments flow (powered by open banking)²

What will it take to make A2A payments more mainstream?  

We believe that there is a positive trajectory for A2A payments. For A2A adoption to scale in use cases like ecommerce, it is important that consumers feel as secure using A2A as they do with other payment methods. Consumers also prefer a more user-friendly and streamlined user experience which removes friction from the A2A journey. Merchants and digital players are looking to provide consumers with a range of payment options, so helping to integrate A2A payments into their existing platforms will improve merchant acceptance and be vital in adoption. Lastly, we believe the scaling of A2A payments will be contingent on value-added services, which leverage consumer data (with consent) to create a secure and seamless payments ecosystem. We believe Open Banking can power many of these enhancements to A2A, to help scale.  

Looking Ahead 

In addition to A2A, there are a number of market forces and themes that we think will be prominent in the Open Banking landscape over the next 12-24 months. A few are highlighted below –   

• There is untapped potential in Open Banking use cases for small businesses. We believe more small businesses will use Open Banking to easily and safely share their banking information, paving the way for an easier lending process and customized financial recommendations to help them with their cashflow.  92% of businesses surveyed believe that it is somewhat to very important to have the latest technology for risk decisioning and credit scoring. Mastercard already offers a comprehensive solution set for small businesses – including real-time business account data, rich cash flow and balance analytics, smarter credit decisioning, etc. and we are continuing to enhance based on what is priority for SMBs.³  

• Use cases for AI in Open Banking will continue to evolve, enabling more personalized financial services experiences. For example, Generative AI can power financial assistants that can make investment recommendations, help with data categorization to give a comprehensive picture of finances, enable more inclusive lending processes, as well as power smarter payments systems with predictive capabilities. We believe AI is a powerful tool for Open Banking, and this is why we’ve been leveraging it to categorize and extract insights from transaction data, which feed into downstream AI models that power our payments and lending solutions. We’ve also partnered with players like bunq, the second largest neobank in Europe, to power spending insights for users – leveraging AI. However, we recognize that data transparency, security, and protecting against bias will become even more important, as Open Banking and AI are intertwined to solve for new and innovative use cases. 

• Real-time payments (RTP) will accelerate, led by the launch of FedNow in the U.S., and the SEPA Instant Payments Mandate in Europe. RTP has already seen strong success in other countries around the world like PIX in Brazil, UPI in India, etc. For consumers, RTP provides the option for swifter bill payments and near instant payouts, especially important for gig economy workers. Businesses are afforded faster settlements, improved payroll, and reduced disputes due to more efficient reconciliation and refunds. Bank adoption and use of RTP rails in the U.S. are still emerging, due to issues such as coverage/interoperability, irrevocable funds, and fraud risk. ​However, government pushes for RTP in Europe and the U.S. may catalyze adoption. Open Banking providers have an opportunity to build out use cases that accommodate RTP and mitigate the fraud risks that come with it. For example, Open Banking can provide risk insights and recommendations around the timing of payment and rail choice. In the U.S., Mastercard Open Banking is providing merchants, fintechs and banks rail agnostic risk signals, enabling payment decisioning across payment methods, and supporting consumer choice and flexible merchant usage.  

• Open Banking will move towards Open Finance, as more expansive datasets are used to offer more personalized and actionable insights and value-added services for consumers. Open Finance moves beyond Open Banking by covering more financial data inputs (e.g., payroll, insurance, investment/brokerage data). The European Commission is working to establish an Open Finance framework that would outline clear rights and obligations to manage customer data sharing in the financial sector beyond payment accounts. In Australia, the CDR is expanding to Open Finance with non-bank lenders and BNPL product providers set to be brought into scope in early 2025 (with first compliance obligations to commence in mid-2026). We believe regulation and consumer demand will serve as a foundation for the expansion into Open Finance, and will create further innovation for services like employee benefits, wealth advisory, etc. Mastercard is already supporting Open Finance in the U.S. – we have connections to payroll and investment data, as well as mortgage data and auto loan data, and are continuing to expand datasets.  

Mastercard’s role in the Open Banking journey 

Our vision in Open Banking is driven by many of the trends we’re seeing in the market and enabling enhanced financial experiences for our customers. We remain diligent in advancing our four primary use cases: payments, account opening, lending, and small business, while leveraging the broader Mastercard ecosystem to provide incremental value to our customers. We are enabling an Open Banking future that empowers consumers and small businesses to share their data for their own benefit and allows all parties in the ecosystem to thrive. To learn more about our Open Banking solution set – please click here. You can also see how Mastercard Open Banking creates priceless possibilities for all here. 

Footnotes

1 – Strong customer authentication (SCA) under the EU’s Second Payment Services Directive (PSD2), mandates multi-factor authentication (MFA) to prevent unauthorized access (link); MFA is not mandated in the US, but FI’s can implement MFA according to their own discretion; Australia’s CDR governs MFA.

2 – Mastercard partners with companies to enable A2A payments in the US; payments flow shown may be supplemented with additional steps from Partner.

3 – Mastercard US Open Banking for Business solutions (illustrative, not comprehensive).

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.

To be competitive in an era of accelerating consumer expectations, deploying a seamless application experience for personal lending, mortgage, tenant screening and other use cases is a must. Slower, resource-laden manual processes invite higher consumer drop-off rates, introduce inefficiencies and can be vulnerable to fraudsters.  

Mastercard Open Banking, provided by Finicity, a Mastercard company, is equipping its customers with the capabilities to deliver smarter and more efficient digital lending experiences.  With the expansion of its Verification of Income and Employment (VOIE) solution to include credentialed payroll, Mastercard Open Banking enables consumers to permission access to their payroll account data, mitigating the need to collect income documentation.  

A more efficient digital experience within the loan application process is precisely what open banking customers need – and credentialed payroll delivers a seamless, secure income and employment verification process, and reliable data at speed. The latest VOIE innovation populates consumer-permissioned data directly into the correct fields, creating a fast, secure digital experience that can boost profitability while making life easier for your applicants and employees.

*Update, September 23, 2024: Credentialed payroll data continues to enhance the digital mortgage process

Freddie Mac has enabled the use of Finicity, a Mastercard Company’s credentialed payroll data for submission to Loan Product Advisor® (LPA^SM) asset and income modeler (AIM).  The capability to submit the data to be assessed through LPA will be effective on September 21, 2024, providing the additional benefit of potential income rep and warranty relief eligibility from Freddie Mac to mortgage clients ordering verification reports from Finicity.

*Update, July 30, 2024: Credentialed payroll data gets a boost

Fannie Mae has authorized the use of Finicity, a Mastercard Company’s credentialed payroll data, sourced from Argyle, for Day 1 Certainty® eligibility. The data will be enabled through the Desktop Underwriter® (DU®) validation service July 30, 2024, providing the additional benefit of rep and warranty relief on validated components to our mortgage clients.   

Strong partnerships that drive industry-leading innovations 

Mastercard Open Banking teamed up with industry-leading payroll data aggregator Argyle to power this expanded VOIE solution. With 90%+ coverage of the U.S. workforce, financial institutions can now digitally verify an applicant’s income and employment in just moments.  

“We’re excited to partner with Mastercard Open Banking to make digital verification of income and employment widely available through our trusted network of consumer-permissioned connections,” said Brian Geary, COO at Argyle. “Together, we are creating smarter lending experiences, free from time-consuming manual touchpoints while achieving faster and more accurate verification​s​,” he added. The combined capabilities of Mastercard Open Banking and Argyle are driving VOIE to be an efficient, flexible solution that comes in at a much more affordable price point than other income and employment verification options, poised to benefit financial institutions and consumers alike. 

“Mastercard Open Banking’s new credentialed payroll enhancement was one of the simplest product launches we have done,” said Josh Cilman, EVP at Intercoastal Mortgage. “The new experience integrated smoothly into our existing processes with no impact to loan processing workflows and an efficient borrower experience. We are excited to digitize our loan application experience with a much more cost-effective way to verify income and employment.” 

Multiple verification solutions to fit your business 

Credentialed payroll is just the latest addition to Mastercard Open Banking’s growing list of digital income and employment verification solutions for smarter and faster decisioning. 

Mastercard Open Banking’s Deposit Income verification solution analyzes direct deposit streams from the consumer’s permissioned bank account data to identify an applicant’s income.  

Freddie Mac launched Loan Product Advisor® (LPASM) asset and income modeler (AIM) for income using direct deposits in March 2022 with Mastercard Open Banking as an initial service provider. In March 2024, Fannie Mae announced general availability of Deposit Income as part of their Desktop Underwriter (DU®) validation service. These solutions help streamline the mortgage origination process for lenders and homebuyers while expanding opportunities for home ownership. 

Mastercard Open Banking solutions are used by financial institutions and decision makers in varied use cases, including mortgage lenders, tenant screeners, personal lenders, credit card issuers and more.  Credentialed payroll and Deposit Income solutions provide financial institutions with the high conversion, affordable income, and employment solutions they seek.  

Bank account and payroll account data can be used independently or in combination to enhance the customer experience depending on the institution’s needs and workflows. 

Partner with Mastercard to create better consumer experiences 

The Mastercard Open Banking platform delivers next-generation financial experiences that delight consumers. The platform serves as a one-stop shop for digital verifications, with the capabilities to verify assets, balances, income, employment, cash flow and much more, seamlessly and at scale. Credentialed payroll and Deposit Income solutions are available today through Mastercard Open Banking’s lending solutions. 

Editor’s Note: The final 1033 rule was released on October 22, 2024. This article reflects Mastercard’s understanding of the proposed rule as released in October 2023. We are reviewing the rule in its entirety. Our goal is to advance open banking in a way that responsibly supports all players in the ecosystem. We will continue to support you as we all navigate this regulation.

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. 

In partnership with Mastercard Open Banking, with services provided by Finicity, a Mastercard company, Fannie Mae continues to work toward improving access to affordable housing with secure banking-powered technologies, speeding up the application process for lenders and reducing the need for manual document preparation.

In addition to helping lenders validate assets and assess a borrower’s rent payment history and cash flow, Fannie Mae’s Desktop Underwriter® (DU®) validation service gives lenders the power to verify a borrowers’ income and employment information using a single 12-month asset report. This digital enhancement is saving lenders time while enhancing the borrower experience.   

Demand for a better mortgage process 

Traditionally, borrowers have been asked to manually collect and share stacks of sensitive income documents with mortgage loan officers, a time-consuming and less secure process that creates inefficiency for both the borrower and the lender. 

A complete digital verification solution for mortgage lenders 

DU provides a digital option that simplifies and removes friction from the application process. When applying for a mortgage, borrowers can access Finicity’s user-friendly Connect consent flow to link their bank accounts, enabling their data to be easily shared with the lender.  

With one report from Finicity, DU can help lenders validate a borrower’s asset, income and employment information while simultaneously analyzing cash flow and rent payment history to help approve more potential homeowners.  

All the verifications needed to process a mortgage application can be conducted on the spot, without paperwork.  

Fannie Mae’s latest innovation leverages Mortgage Verification Service (MVS) from Finicity as a leading report supplier to power the verifications needed to process a mortgage application.  

• Fannie Mae’s Digital Verification Solution requires an asset report of 12 months or more to run
• Lenders must request that this feature be turned on

“With Desktop Underwriter® (DU®), lenders can now get even more benefits from using a single 12-month asset report. We continue to look for ways to help lenders streamline their validation processes and improve the borrower experience, and this latest enhancement helps them do just that.” 

Peter Skarnulis, Fannie Mae Vice President, Business Account Management Solutions

Want to elevate your efficiency while enhancing the customer lending journey? Get started today. 

The next generation wants control over their data for a more transparent lending experience

Having grown up with the internet, smart phones, and social media, young Millennials and Gen-Z borrowers are particularly savvy about using their digital footprints for their own benefit.  

They embrace technology to streamline everyday tasks and they want to make informed decisions about transactions. As they increase their presence in the workforce, they are becoming the generations poised to drive the future of lending.  

When Mastercard surveyed 7,600 consumers across the United States, Canada, the United Kingdom, Australia, France, Germany and Spain about their recent financial experiences, young people’s voices came through: They want a more transparent, simpler, digitally-enabled lending process.  

And open banking can make this a reality. Using secure APIs, advanced data analytics, and machine learning, open banking technology allows consumers to safely share their financial data, giving a more up-to-date and holistic view of their ability to repay a loan or afford a line of credit.

Most borrowers are already on board. According to our survey, 77% of those ages 45 to 60 and 68% of those over 60 are willing to grant access to their banking data to secure a credit or loan. Among respondents 18 to 29, the number shoots up to 84%.   

Nearly 60% of younger customers have already linked their accounts while applying for a loan. And, as digital natives, nine out of ten would prefer a loan option with a digital application or approval process.

The consumer base is changing, opening a window for the industry to evolve in step. Today’s borrowers are calling for a new, digital-first era of lending, giving applicants more control over the information used to determine their creditworthiness.   

By allowing consumers to share access to their financial data, open banking can provides a current view of their ability to repay a loan or afford a line of credit for more transparent lending decisions – and a more financially inclusive economy.

Younger borrowers are embracing digital lending

Read more about the future of lending in Mastercard’s Lend Report here.  

How open banking paints a more nuanced picture of borrowers 

Even in the best economic circumstances, loans are often a necessity, especially for critical purchases like homes and cars.   

 For some insight into the lending landscape, Mastercard surveyed 7,600 consumers across the United States, Canada, the United Kingdom, Australia, France, Germany and Spain about their recent financial experiences.   

The upshot: 89% have been adversely affected by economic pressures, and nearly half are struggling to get the loans and credit they need.  

Traditional credit scores do not always reflect an applicant’s ability to make payments. Individuals with thin or no credit history can struggle to qualify for credit. Young adults on their own for the first time, gig workers who deal mostly in cash, new Americans and retirees with a single credit card and no loans can struggle to qualify for leases, credit cards and mobile phone contracts. 

To most consumers, change is overdue — 87% believe the decisioning process should make it easier for responsible borrowers to prove their ability to repay. 

Open banking could help provide that missing piece. By choosing to share their bank account data, applicants can paint a more complete picture of who they are. Real-time insights into their accounts — such as a thin credit borrower’s biweekly deposits, cash flow or consistent payments for bills like utilities — offer an up to date, more comprehensive view of their financial health.  

This shift in consumer mindset opens new horizons for lenders, allowing them to champion more inclusive processes.  

Open banking has the potential to accommodate millions of thin-credit applicants who have previously had difficulties accessing the benefits of the financial system. Consumers have spoken. They want the next evolution of lending to prioritize transparency, accessibility and empowerment for consumers worldwide to build a more inclusive digital economy where everyone thrives.  

Digital lending is on the rise

The data revealed in Mastercard’s Lend Report shows global consumer support for a more transparent, digital-first approach to lending. Read more about the future of lending in Mastercard’s Lend Report here.

The future of digital finance is evolving, and it’s happening just in time

Over the last few years, the move to digital finance has accelerated. Consumers are adopting emerging financial apps and services, empowering them to take control of their financial health. The same technological leaps that are enhancing payments, financial management and banking are also changing lending for the better, and they couldn’t have come at a more opportune time. 

That’s because consumers are feeling the impact of economic uncertainty and worry about the effect that it may have on them. In a 2023 survey, Mastercard spoke to 7,600 consumers across the United States, Canada, the U.K., Australia, France, Germany and Spain about their recent financial experiences.  

 Over 89% of respondents say that they’ve been negatively affected by economic uncertainty.  

At the same time, whether they’re making big purchases like homes or handling everyday needs like transportation or food, consumers worry that they won’t be able to borrow what they need.  

Open banking data can help consumers get to the bottom of these challenges.   

For starters, open banking allows consumers to permission access to their bank account, allowing lenders to augment their credit decisioning models with real time information that gives a better view of the consumer’s ability to repay a loan. That’s important because 95% of those who have been denied a loan in the past two years want more insights into the lending process. People are willing to share secure access to their bank account data, if it means better interest rates, instant approval for a loan, improved chances of being approved for a credit card or to secure an increase in the limit on a credit card.    

Lenders benefit, too. By augmenting traditional credit models with open banking, they can improve operational efficiencies, lower costs and create innovative new lending models that can give consumers the credit they deserve, when they need it.   

The world is going digital

The data revealed in Mastercard’s Lend Report shows global consumer support for a more transparent, digital-first approach to lending. Read more about the future of lending in Mastercard’s Lend Report here.

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.