Expert opinion: Regulatory uncertainty won't slow pay by bank

Leadership shake-ups, agency downsizing and political maneuvering have cast uncertainty on the status of many U.S. regulatory changes. 

In payments, this uncertainty has left some hesitant about the future of open banking, and by extension, pay by bank.

But this narrative misunderstands both the nature of regulatory change and the resilience of private-sector financial innovation.

The reality is, pay by bank remains strong and relatively unaffected by turbulence within government agencies. 

This is largely because: 

• Many businesses and financial institutions have already embraced pay by bank
• The infrastructure supporting pay by bank is built independently of regulatory fluctuations (although it can certainly be improved by common standards)
• The momentum behind pay by bank is driven by the market, not by government agencies

Keep reading for a deeper look.

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The status of rule 1033

Rule 1033, often called “the open banking rule,” was designed to give consumers greater control over their financial data. 

The rule mandates that:

• Banks and wallets provide secure and standardized access to financial data, allowing consumers to connect their accounts to fintech applications and alternative payment methods
• Third parties obtain consumer authorization to obtain the data at least annually

Despite the current internal regulatory challenges, Rule 1033 is a law, and it is not going anywhere.

1033 already enjoys strong bipartisan support, and there is no significant movement to repeal it. If anything, the rule may be refined or delayed slightly, but its core function remains intact. 

Regardless of 1033, the shift toward open banking (particularly its function within pay by bank) will continue by necessity and market demand.

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Open banking is driven by private innovation, not regulators

In Europe, open banking is driven by central bank mandates. But in the United States, the private market is developing and implementing these standards.

That’s not going to change because the private market also benefits from open banking standards. 

Open APIs provide better data accuracy, stronger security, and a more efficient financial ecosystem. 

Even if regulatory influence is reduced, banks and fintechs will continue moving toward standardized data-sharing models because it is in their best interest to do so.

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The impact on pay by bank

It’s a misconception that pay by bank is tied to the fate of Rule 1033 and, by extension government regulation. 

Pay by bank has entered as a flexible, affordable addition to merchant checkouts. It does not rely on government-mandated regulations to function.

Data aggregators like Aerosync have already established direct oAuth connections with thousands of U.S. banks. This enables secure, frictionless authentication without the need for outdated screen-scraping techniques. 

At Aeropay, we’ve even implemented alternative verification methods for non-oAuth institutions that do not rely on screen scraping or microdeposits.

These innovations make pay by bank highly secure and user-friendly, further driving adoption while more banks come on board.

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Final thoughts

As a longtime fintech and banking professional, I personally hope to see more stability ahead for regulatory institutions—both for the industry and for the many talented individuals who work in it.

I spoke about this topic recently at ePay Connect. My sentiments were shared by many at the event.

Open banking is already here, it's successfully facilitating data sharing for pay by bank transactions, and the momentum is only building.  

For more compliance insights, connect with me on Linkedin.