This spring, the original deadline for the first major milestone in the U.S.’s open banking rollout passed quietly. 

While some U.S. financial institutions may be thankful for the reprieve, I believe it’s highly detrimental to our payments ecosystem, and the greater financial services domain here overall. 

Here’s why: With open banking legislation in the EU well-established, Europe typically sets the baseline of what’s possible in real-time, instant payments, rolling out new capabilities across the entire market at once and creating more consistent user experiences. 

Because many digital payments fintech apps operate across borders, they tend to “import” expectations, with U.S. users expecting their own banks to be able to do the same things. 

The EU-U.S. payments innovation gap is real and consumer-facing, and when U.S. consumers’ own banks can’t deliver the same experiences – instant, seamless, account-to-account transfers, universally enabled through mandated open banking – these banks face an unprecedented threat of churn, with switching currently at record highs.

Per the last point, you may be thinking — well, that’s not all bad news — U.S. consumers will surely benefit from increased competition and choice among banks. But that’s not necessarily true. 

There are clear signs that leading payments players and fintechs may be pulling out of the U.S. to prioritize other, more “open banking-friendly” regions. This highlights the immense difficulties they face when trying to penetrate our banking sector, as well as the clear advantages that more open banking-friendly regions afford, including lower processing costs; faster payments initiation; access to richer financial data for smarter risk; and underwriting and improved fraud detection, and more.

If complex, costly integrations with U.S.-based financial institutions and the lack of ancillary business benefits continue to be a deterrent, we can expect more global fintechs to follow in these footsteps, ultimately leading to less innovation and choice for U.S. consumers. For their part, U.S. financial institutions may have fewer options when it comes to quickly and easily extending their feature-sets and services.

While FDX-compliant financial services firms rely on more secure APIs for data sharing, those that are not compliant often continue to rely on outdated screen-scraping to share data with third-party fintechs. 

These same organizations claim that data sharing through an open banking model is too risky - but in reality, relying on screen-scraping as a fallback method raises equally, if not more serious security concerns, requiring users to share sensitive log-in credentials which can lead to fraud or misuse.

I understand fully why some U.S. financial institutions – particularly those that don’t rely heavily on data-sharing – may resist the idea of open banking mandates as costly, risky and unfair.

But ultimately, I believe this is a myopic viewpoint that will only hurt U.S. payments innovation, and our broader financial services industry and its users, in the coming years.