Creating a Fair and Competitive Financial Environment

By Lexi Hall, Director of Policy, MX

A theme has emerged from the D.C. offices of financial services regulators: competition. At the Consumer Financial Protection Bureau (CFPB), Director Chopra has lauded the Bureau’s mandate to ensure that consumer financial markets are fair and competitive. The CFPB most recently announced a new Office of Innovation and Competition that will “identify obstacles for new market entrants.” 

Not to be outdone, The Office of the Comptroller of the Currency (OCC)’s Comptroller Michael Hsu warned in March that “banks that hesitate to adopt pro-consumer overdraft programs will soon be negative outliers” due to a competitive landscape of fintechs and other financial institutions moving first. 

While competition has long been a focus for financial regulators, this time feels different. This is especially true given the anticipated CFPB rulemaking that will implement a consumer’s legal right to access and share their financial account information. This right is the foundation for the future of financial services, beginning with Open Banking. In simple terms, Open Banking represents:

1. The clear positioning of individuals as rightful owners of their data;
2. The ability for individuals to give consent to share their financial data with third parties; and,
3. The data-sharing technology, like APIs, that make Open Banking possible.

Today, consumers who want safe and secure access to their data have to choose among the largest financial institutions to get desired levels of service, aggregation, and connection access. An estimated 2 in 5 American bank account holders, or 99 million, are without access. Why does this matter?

Data drives insights. Insights drive decision making and those who control it hold the power. Our closed banking system assigns consumer decision making almost exclusively to the largest gatekeepers of data and those most incentivized against change. 

But, it can change. Data access and portability means consumers make their own financial decisions. They can shop around, compare prices, and find a product to suit their needs. 

Compare this to the status quo: banking is commoditized because it’s closed. Firms compete on the same playing field: attracting deposits, interest rates, and loyalty programs. They don’t compete on improving consumer outcomes (e.g. more savings, lower cost of borrowing, less time spent managing money) because they don’t have to… so long as consumers have no better alternative.

This is the promise of Open Finance. When consumers are selective, market players compete for their business. How? Lower costs, higher quality services, more personalization. In other words, a financial system incentivized on providing you a better outcome. 

This is what we strive for at MX — financial services that achieve consumers’ financial goals, regardless of profit. We call it nobility in banking and it’s why we’re an open finance company. Connectivity breeds choice. Choice breeds competition. And eventually, it leads to an entire ecosystem of market players who use their resources to build outcome-based products.