American financial institutions are already facing an incredibly complex regulatory environment. What’s coming will only make matters more challenging.

Why? A convergence of emerging policy priorities in Washington is creating a raft of new compliance risks. This trend can have increasingly negative impacts on industry innovation by directing time and resources that could instead be allocated toward improving product development or client services.

Institutions that hope to stay ahead of the regulatory curve will need to revitalize their compliance operations with a tech-first approach and involve compliance early on in any product or service development efforts. Doing so saves time and money and helps drive a culture of continuous innovation during regulatory ebbs and flows.

The future of open banking regulation

At the recent Money 20/20, Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra announced the rule-making process, pursuant to Section 1033 of the Dodd-Frank Act, to develop regulations that will “strengthen consumers’ access to, and control over, their financial data.”

This is a major step toward “open banking” and “open finance” that will have significant ramifications for financial institutions that offer deposit accounts, credit cards, digital wallets and other transaction accounts.

Under this rule (which should be finalized in 2024), covered firms will be required to provide consumers with their financial information or provide it to a third party at the consumer’s instruction. Other proposals will also be considered, such as efforts to ease the process of transferring accounts between companies and new requirements surrounding personal financial data privacy.

Disrupting the U.S. ...