Editor's note: Steve Boms is the executive director of the North American division of the Financial Data and Technology Association. All views expressed in this article are those of the author.

The era of open banking—a time when consumers and small businesses can fully control their own financial data—may finally be arriving. The United Kingdom, Australia, and the European Union are already leading the way, while the United States is also beginning to establish private-sector working groups to start designing voluntary open banking standards. However, the role of these working groups is limited. Legislators and regulators must view these voluntary coalitions as a starting point for dialogue, not an end point.

These institutions alone cannot achieve open banking. Private-sector-led efforts, which often involve only some industry stakeholders, may lead to asymmetries in adoption levels and consumer protections. Policymakers need a coordinated effort to update federal regulations to build a system that allows consumers to fully use all their financial data—regardless of which bank they work with or which fintech tools they use. This means establishing accountability and liability rules to ensure that, where there is sufficient evidence of third-party liability, the party responsible for a data breach can compensate consumers for any resulting economic losses. At the same time, as the foundation for building such a system, it must be made clear that consumers and small businesses have the right to authorize access to all their financial data.

If implemented properly, open banking will safeguard the safety and stability of the financial system while empowering customers and accelerating innovation opportunities. These issues are challenging, but if industry-led working groups are well-composed and clearly scoped, they can lay the groundwork for policymakers to unlock the potential of open banking for consumers and small businesses.

Key areas these working groups need to focus on must include: scope, authorization, accountability and liability, legal and regulatory structures, technology, governance, and oversight. To properly deliberate on these topics, standard-setting bodies must include representatives from all stakeholders in the financial services and fintech sectors. Lenders and consumer organizations must also be included, and representatives from each area should be regarded as indispensable and of equal standing. Working groups should also include government representatives, whose primary role is to encourage participants to look beyond commercial interests and place consumer interests at the core of discussions.

Recognizing that technical standards will be a key element of the outcomes of any successful open banking standard-setting body, the related work of other organizations globally must be seen as part of the broader open banking standard-setting ecosystem. If consensus cannot be reached, working groups should explain to government stakeholders the need for intervention and the suggested form of intervention.

Of course, underpinning all of this work is the need for legislators to grant consumers a legal right to use their own financial data through the financial service providers of their choice. This right does not currently exist, and its absence limits consumers' freedom to choose products and services that best fit their financial situations, while also hindering competition, price optimization, and innovation.

Because consumers have no legal right to share data, the current system for data authorization between financial institutions and fintech companies in the United States is cumbersome. The only tool for sharing information is bilateral agreements between financial institutions, data aggregators, and fintech companies. The Clearing House recently released a "model agreement" for such collaborations, but it implies that every U.S. financial institution would need to sign contracts with every aggregator, which is nearly impossible to negotiate and execute in practice. Even if this outcome were feasible, individual terms between counterparties could vary by financial institution and aggregator, leading to an uneven playing field—some consumers and small businesses might gain more financial opportunities due to contract terms they cannot see. While bilateral agreements may be a necessary tool in the short term in the absence of open banking standards, they should not be viewed as a long-term solution for open banking.

It has been two years since the Consumer Financial Protection Bureau (CFPB) issued its principles on financial data sharing. Although the industry has made gradual progress since then, it is now time for U.S. policymakers to make the system fairer and more transparent; if they want their constituents to have access to fintech tools just like people in other countries, they must act quickly.