Monday, February 6, 2023
"The regulatory landscape is changing at an unprecedented rate," Davis said in a statement. "It's challenging for financial institutions to keep up as they already have a full plate."
The SRM study, published Feb. 1, 2023, highlighted open banking considerations and four other areas the Consumer Financial Protection Bureau is reviewing: junk fees; credit card late fees; bank and fintech partnerships; and buy now, pay later. These issues will dominate near-term discussions among regulators and financial service industry stakeholders, Davis stated, adding that SRM expects to see "a flurry of announcements, proposed rules and financial penalties in the months ahead."
Davis additionally noted the CFPB invited commentary on open banking from the financial community and interested parties in preparation for formal rulemaking.
"The [CFPB's] comment period closed on Jan. 25," he wrote. "The move represents a critical step toward open banking – something that the European Union and the British government have already taken. Consumer advocates have championed open banking for some time to make financial services more inclusive and competitive."
Scott Talbott, senior vice president, government affairs at the Electronic Transactions Association, noted that BaaS can improve financial service access and reach for all citizens.
"ETA's membership includes both banks and fintechs who are working together to utilize BaaS to deliver financial services to all Americans, especially the underserved," he said. "Each year, ETA produces an annual report on how our members are helping the underserved with products and services like BaaS. The report is called "Creating a More Inclusive Economy: How Fintech Advances Digital Resources for Underserved Communities."
Damon Kirk, CEO and co-founder at Obsidian Bank, pointed out that BaaS allows service providers to orchestrate the customer journey and create a holistic customer experience.
"Serving as your customers' concierge, you can use BaaS to identify pain points and create offerings that would benefit tomorrow's banking-as-a-service companies," he said. "Instead of offering just mortgages, companies could provide real estate journeys, incorporating the inspection, insurance, mortgage and utilities while also integrating rent and tenant management as a subscription service."
Kirk went on to say that BaaS enables financial institutions and third-party service providers to build a product for where their customers currently are, as well as to easily expand it to capture where they're headed.
The SRM study cited consumer privacy and risk management as top issues for service providers implementing BaaS in the United States.
"Suppose FIs are counted on to safeguard customer data," Davis wrote. "How can they determine if a request to share or transfer data is legitimate or whether a consumer fully understands the rights they are conferring? Would an FI face penalties for sharing data with parties a consumer later learns had ill intentions? Will the costs of maintaining these safeguards prove onerous for smaller institutions? Such matters should be sorted out this year."
Allen Kopelman, CEO and co-founder of Nationwide Payment Systems, agreed, stating the U.S. market is far more complex than the UK market, which may complicate implementation.
"Consumers need to permit banks and third parties to share their data," he said. "And we need more protections with peer-to-peer payments and pay-by-bank. What if someone makes a mistake or keys in the wrong account number or phone number? We can't afford for innovation to outpace regulation."
A copy of the SRM report is available at info.srmcorp.com/keeping-watch-over-the-cfpb 
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