Samaha & Associates New White Paper Takes a Progressive Look at Open Banking

By W.B. King

In its latest thought leadership white paper, The Future of Open Banking: a Credit Union Guide, Samaha & Associates examines a plethora of related issues, ultimately finding that despite pending government regulation, open banking represents the future of finance in an increasingly fragmented market.

“While an open banking strategy can be constructive for credit unions, the purpose of this white paper is to better understand the future of open banking and its moving parts,” noted CEO Sabeh Samaha, who authored the white paper with Managing Consultant Adam Denbo and Senior Consultants Steven Uhrman and Ryan Prentice. “This investigation includes determining inherent benefits and risks, understanding emerging technologies like artificial intelligence (AI) and machine learning (ML), and addressing compliance regulations and pending legislation.”

Since 1998, the Miami-based technology-driven consulting group has worked collaboratively with financial institutions to develop, manage, and execute technology related optimization strategies.

The white paper also looks at the impact of the Consumer Financial Protection Bureau (CFPB) rescinding its support of open banking legislation that it once touted—providing options to “strengthen consumers’ access to, and control over, their financial data as a first step before issuing a proposed data rights rule that would implement Section 1033 of the Dodd-Frank Act.”

Defining Open Baking for Credit Unions

Since the term “open banking” can have different meanings for different audiences, the authors also break down what open banking specifically means to the credit union industry.

To achieve this directive, in part, the white paper features insights from industry leaders such as Ben Maxim, chief technology officer for the East Lansing, Mich.-based MSU Federal Credit Union (MSUFCU). The most typical use case for open banking, Maxim noted, is account aggregation where a fintech offers an app that links all credit union or bank accounts, which, in turn, provides members with a better picture of their financial standing. When MSUFCU first started down the open banking path, it was in response to members wanting to import their data into Quicken, QuickBooks and Mint.com services, he explained.

Maxim also serves as chief operating officer for MSUFCU’s wholly owned CUSO, Reseda Group. The organization improves the offerings of technology in the credit union space, both through investment in other CUSO fintechs and by building its own products and solutions, including initiatives that help connect fintechs and credit unions together.

Among takeaways from the white paper are the following five open banking benefits: personalized products and services, faster payments and transfers, improved access to credit, empowered financial control, and cost savings.

Importance of Tech Stacks and Knowhow

As is the case when adopting any technological initiative, including open banking platforms, there are risks. One significant challenge with open banking, the white paper noted, is increasing the places where data is shared. This process, however, can be mitigated through creating or implementing a tokenized web service to manage the data connections.

Sabeh Samaha

“When external risks are adequately addressed, a credit union must then determine if its tech stack is equal to the open banking challenge. To be successful in open banking, a credit union must build APIs [application programming interfaces] that securely connect to vetted aggregators and fintechs, while adhering to governance updates that support a member privacy policy. As such, it can be a protracted process,” the white paper noted. “As credit unions determine open banking strategies, they can benefit from conferring with seasoned technology consultants who are well-versed in addressing related issues and developing tailored strategies.”

Read the entire white paper here.