Bank customers should have access to lower loan fees, higher interest rates and better finance management tools, the Consumer Financial Protection Bureau (CFPB) says — and open banking holds the key.

In a blog post, CFPB director Rohit Chopra said the bureau planned to make use of an as-yet-unused power to boost competition by giving consumers greater control over the use of their data. The CFPB will consult on a formal proposal later this year, with a view to enacting new rules in 2024.

“New digital banking technologies have the power to expand and open market access for American consumers and emerging businesses,” Chopra wrote. “In a more competitive market, Americans will be able to earn higher rates on their savings, pay lower rates on their loans, and more efficiently manage their finances.”

New technologies “have not yet reached their full potential”, he added, meaning bank customers still came up against obstacles when trying to switch banks.

Chopra emphasized that an open banking system needed to be constructed through collaboration with other standard-setting organizations, and without micromanaging.

He said: “Fair standards developed by the market to leverage our rule will be critical to the creation and maintenance of an open banking system in which consumers can vote with their feet — and exercise their data rights without being trapped by powerful incumbents and without losing control of their data.”

Many banks have begun to embrace digital technologies in recent years, with work accelerating due in part to the Covid-19 pandemic. Cloud computing and automation technologies have helped to speed up some companies’ ability to process loan applications and new accounts, while connectivity technology such as APIs is also helping to make processes more efficient.