The FedNow network and the Consumer Financial Protection Bureau’s upcoming data-access proposal will usher in faster payments and open banking, which will level the playing field for smaller banks and give customers much more flexibility in switching. This, in turn, will spur institutions to step up their retention efforts.  

This year will bring two important landmarks for the banking industry: The launch of the Federal Reserve’s long-anticipated instant-payment system, FedNow, and proposed regulation to force banks to share data with other institutions when asked by a consumer.  

Both changes could have rippling impacts:  

FedNow is widely seen as poised to give smaller banks and credit unions a way to compete with their larger competitors on instant payments, while the proposed regulation would make it easier for people to “break up with banks that provide bad service,” according to CFPB director Rohit Chopra.  

Ultimately this would reduce the traditional “stickiness” of banks, requiring them to either work harder to keep customers happy or risk losing them. For example, community banks with higher interest rates may suddenly become more attractive to customers that may otherwise not have wanted the hassle of switching institutions or losing access to instant payments.  

Per American Banker’s John Heltman: These “two regulatory innovations — faster payments and open banking — are consequential on their own, but when taken together are greater than the sum of their parts.”