Open Banking: Why Small and Medium-sized Banks Must Act Now

Larger banks are already implementing Open Banking, and fintechs are capturing market share by offering innovative, API-driven services. The longer smaller banks wait, the harder it will be to catch up. 

The Consumer Financial Protection Bureau has mandated that banks must comply with its Open Banking rule in phases, starting in April 2026 for the largest banks (over $250 billion in assets) and gradually extending to smaller institutions by 2030. Banks that act now can shape their Open Banking strategy on their terms rather than rushing to comply later. 

Failure to act could mean losing customers—not just to fintechs but to traditional competitors that have embraced Open Banking. Banks that wait too long may find themselves unable to offer seamless digital experiences, leading account holders to migrate elsewhere. Open Banking isn’t just about compliance—it’s about staying competitive in an evolving financial landscape. 

Outside of compliance, Open Banking also offers opportunities for new revenue streams. Banks that move now can take advantage of API-based services, create personalized financial products and form strategic partnerships with fintechs to expand their offerings. Early adopters will be best positioned to lead in the industry’s next phase of innovation. 

Banks don’t have to overhaul everything overnight, but they need to begin preparing now. Here are some immediate steps to get ready: 

• Assess internal systems: Determine whether your infrastructure can support Open Banking APIs and identify gaps that need to be addressed. Evaluate outdated systems, inefficiencies or security vulnerabilities that could slow down implementation. 

• Develop an Open Banking strategy: Define what data will be shared, how it will be secured and how it will be able to integrate with existing services. 

• Explore collaborations with fintechs: Build partnerships that expand offerings, like investment products, personal finance tools and lending services. Banks don’t have to develop everything internally—leveraging fintech capabilities can accelerate innovation. 

• Start small with proof-of-concept projects: Test low-risk ways to take advantage of Open Banking’s potential before committing to a full-scale implementation. 

By taking action now, banks can expand their product offerings, attract younger digital-native customers and position themselves as future-ready institutions. New revenue streams, such as white-labeled Banking-as-a-Service (BaaS), personalized credit products, instant peer-to-peer payments and advanced fraud detection services can enhance profitability and customer retention. 

Financial institutions that take advantage of Open Banking can unlock significant growth opportunities. They can expand customer services by enabling seamless integrations with budgeting tools, wealth management platforms and digital payment solutions. They can create new revenue opportunities through premium API-based offerings that allow businesses to access real-time financial insights, fraud detection and cash flow analytics. They can also improve lending processes by using Open Banking data to assess creditworthiness more accurately, leading to faster approvals and better loan terms for customers. Additionally, embedded finance solutions allow non-financial companies to offer banking services—such as payments, lending or accounts—directly within their platforms. 

At GFT, we partner with financial institutions to help navigate Open Banking adoption, ensuring security, compliance and business growth. With experience working alongside banks and fintechs, we understand how to tailor Open Banking strategies to fit your institution’s unique needs. 

We’ve already helped financial institutions successfully integrate Open Banking strategies—let’s talk about how we can help you do the same. Schedule a consultation with our experts today.