MIAMI—While some analysts view the CFPB’s decision to withdraw its open banking rule as a wise move, one expert remains skeptical, warning that credit unions and banks may ultimately suffer in the long run.
"Rescinding the open banking rule might seem like a win for some financial institutions in the short term, but it's ultimately a step backward,” said WalletHub CEO Odysseas Papadimitriou. “The rule was about empowering consumers to take control of their financial data, and when consumers are better informed and more engaged, everyone benefits—including financial institutions.”
Papadimitriou emphasized that open banking fosters transparency, competition, and innovation.
iStock-Funtap
“Rolling it back protects the status quo instead of pushing the industry to improve,” he said. “That’s not good for long-term trust or for institutions that want to lead rather than follow."
As CUToday.info has reported, the open banking rule, which was to be phased in during 2026, was expected to be costly for institutions. The rule required the development of secure, real-time systems for data access and sharing—bringing with it, too, additional regulatory burden and employee hours. Analysts have also stated that smaller FIs faced the greatest challenge with open banking, and may not have been well prepared.
Odysseas Papadimitriou
"Credit unions weren’t fully ready for the open banking rule, especially smaller ones with limited resources,” said Papadimitriou. “So, in the short term, this rollback might feel like relief. But long term, it’s a missed opportunity. Open banking could’ve helped credit unions compete more effectively by giving their members easier, safer access to financial tools. Resisting progress might protect comfort now, but it risks us falling behind later."’
Papadimitriou addressed the data privacy concerns the rule raised, as many within credit unions worried about having to share information with unregulated fintechs.
"Sharing data more broadly can increase exposure if not done carefully,” Papadimitriou noted. “But the rule was designed to give consumers more control over their own data, not to make it a free-for-all. With the right safeguards, open banking can actually improve security by making it easier for consumers to keep tabs on their financial accounts.
“While data privacy and fraud risks are valid concerns, the rule also promised more competition and innovation, which could help address those concerns over time,” Papadimitriou continued. “The key should be improving security, not slowing progress…Special interests win. Consumers lose."
Jeff Cardone
Jeff Cardone, partner at law firm Luse Gorman, called the rule well-intentioned from a consumer protection standpoint.
“But there were so many unknowns related to its implementation, which caused great concern to CUs and banks,” Cardone said. “Also, it is unclear what aspect of the rule was deemed unlawful. Further, the CFPB must go through the formal rulemaking process to withdraw a final rule, including submitting a notice to the Federal Register and providing an opportunity for the public to comment on the withdrawal.”