The Transition from Screen Scraping to Open Banking: A Marathon, Not a Sprint

The journey towards open banking in the United States is proving to be a marathon rather than a sprint, marked by twists and turns, and the eventual demise of screen scraping, as stated by PYMNTS.

One of the key questions in this transition is the role of data aggregators and how screen scraping will gradually disappear from the financial landscape.

Recently, The Clearing House Association and the Bank Policy Institute voiced concerns about a proposed open banking rule by the Consumer Financial Protection Bureau (CFPB). They argued that the rule, which aims to implement section 1033 of the Consumer Financial Protection Act of 2010, falls short in safeguarding consumer financial data. The rule seeks to compel depository and non-depository entities to provide certain data related to consumer transactions and accounts to consumers and authorized third parties.

The CFPB’s proposed rule aims to reduce reliance on screen scraping, a practice where many companies currently access consumer data by having individuals share their usernames and passwords with third parties. The goal is to move the market away from these risky data collection practices.

Screen scraping has been in use since the early days of the internet, involving the transfer of data displayed on one screen or application to another. This data often includes sensitive information, such as login and financial details. The main issue with screen scraping is the inherent security risks it poses. Banks cannot verify the authenticity of the party accessing the data, leading to a lack of control over the information being accessed.

In contrast to screen scraping, banks are increasingly adopting application programming interfaces (APIs). Some, like JPMorgan, have even started blocking certain aggregators. However, the transition to open banking is proving to be a long and challenging process.

The Independent Community Bankers of America highlighted the burden of requiring banks to build and maintain portals for third-party access. Smaller banks, in particular, find this to be a significant challenge. They suggest a transition period of five to eight years, with implementation staggered based on asset size.

The shift toward APIs is a fundamental aspect of the open banking evolution, as they offer standard security protocols and enable the collection and secure transmission of specific data elements. For aggregators like Plaid, the majority of connections are now facilitated through APIs, ensuring a more secure and efficient data-sharing process with financial institutions like Capital One and JPMorgan Chase.

Furthermore, Fiserv and Plaid have partnered to streamline connectivity between banks and external entities. This partnership allows banks to share data securely without the need for extensive manual processes. Matt Wilcox, president of digital payments at Fiserv, highlighted the advantages of APIs in granting consumers control over data access at an application level, reducing fraud and friction in the process.

The transition from screen scraping to open banking is a gradual process that comes with its own set of challenges. While APIs are becoming the preferred method for data sharing, there is still work to be done in ensuring a smooth and secure transition for all stakeholders involved. The debate over the future of screen scraping continues, with some advocating for an outright ban, while others emphasize the need for a measured transition period.