By Bradley Wallace
After more than a year of debate and uncertainty, the Notice of Final Ruling on section 1033 is finally here. The vast majority of community banks—with the exception of those with fewer than $850 million in assets—now face a compliance timeline of about two to five years depending on asset size.
But this new open banking regulatory landscape is about more than compliance.
It’s about embracing innovation and the opportunities it creates for community banks to better understand their account holders—and to acquire and retain them.
With the Final Rule in place, community banks can now take the steps to prepare for and capitalize on the opportunity 1033 presents when the compliance deadline arrives.
Here is what community banks should focus on between now and then.
Updating Vendor Due Diligence and Gaining Alignment with Service Providers
How community banks assess and model risk will need to change, especially when integrating third parties like fintechs and core providers. The growth of open banking over the last decade has created a complex web of partners, technologies and data flows. A lack of controls until now can increase the risk that comes with data living with multiple entities, each with its own set of standards and processes. Compliance teams should start an open dialogue with their vendors to assess their current data standards, how they update their policies as a result of the Final Rule and how they manage user controls and permissions.
Start the Discussion About Customer Education and Awareness
Community banks have a fundamental advantage over their national competitors: They understand their local markets and provide a more intimate banking relationship with their customers.
Lean into that advantage. Take the time now to determine how you can effectively communicate the impact 1033 will have on them. How will you engage with every account holder every year to reauthorize data sharing permissions? How do you reach the digital-savvy millennial vs. the 85-year-old retiree who still writes checks and prefers mailed statements? Create that policy now so that, when the deadline comes, it’s embedded in every process, employee and department.
Embrace Innovation
Community banks have several years to meet the 1033 compliance deadline. Use that time to gain even greater insight into what your account holders want. That starts with reducing friction within existing products and workflows like digital banking, account opening and lending applications.
But what else do your account holders want and need? Hold focus groups, distribute a survey to critical customer segments, conduct one-to-one outreach to loyal customers and those at risk of leaving. Build a policy for tellers and in-branch representatives to ask branch visitors what else they’d like to see from your bank. Leverage existing customer data to yield insights about individual behavior and trends at scale.
Collect those inputs, analyze them, then assess how you can adjust your offerings and implement new ones across your most important lines of business and find the next solution that gives customers what they want, and perhaps something they didn’t even know they wanted. That way, when the time comes, not only has your community bank deepened its existing relationships and minimized the risk of losing customers—it will be fully prepared to welcome new ones with open arms and a full suite of solutions that satisfies both their expectations and their needs.
About the Author
Bradley Wallace is the director of compliance at CSI, where he works directly with community banks of all asset sizes to understand and meet evolving regulatory and compliance requirements as they innovate and grow.