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40 Yale J. on Reg. 1 (2023)

handle is hein.journals/yjor40 and id is 1 raw text is: The Promise & Perils of Open Finance Dan Awrey & Joshua Maceyt We are at the dawn of a new age of Open Finance. Open Finance seeks to harness the potential of new platform technology to enhance customer data access, sharing, portability, and interoperability thereby leveling the informational playing field and fostering greater competition between incumbent financial institutions and a new breed of financial technology (fintech) disruptors. According to its proponents, this competition will yield a radical restructuring of the financial services industry, offering more and better choices for consumers looking to make fast payments, borrow money, invest their savings, manage household budgets, and compare financial products and services. The promise of Open Finance is very real. Yet its proponents have largely ignored the economics driving the development of the key players at the heart of this new infrastructure: data aggregators. Data aggregators are the connective tissue of Open Finance the pipes through which most of this valuable data flow. Like other types of infrastructure, these pipes are characterized by economies of scale and network effects that erect substantial barriers to entry, undercut competition, and propel the market toward monopoly. In the United States, these dynamics are compounded by the highly fragmented structure of both the conventional financial services industry and the emerging fintech ecosystem. The result is an embryonic market structure in which a small handful of data aggregators have a massive head start, and where one company in particular Plaid already enjoys a dominant market position. This Article describes the promise and perils of Open Finance and explains how policymakers can tap into its potential while simultaneously preventing the abuse of monopoly power and avoiding the creation of a new strain of too-big-to-fail institutions. t Assistant Professor of Law, University of Chicago Law School; Professor of Law, Cornell Law School. The authors would like to thank the Robert Helman Law and Public Policy Fund for its generous support. They would also like to thank Vince Buccola, Lev Menand, John Pitts, Rory Van Loo, Yesha Yadav, along with the participants of conferences and workshops hosted by the American Law & Economics Association, the Canadian Law & Economics Association, University of Toronto, Boston University, Rutgers University, and Brigham Young University for their extremely helpful comments and suggestions. Lastly, the authors would like to acknowledge the exceptional effort and contributions of the editors of the Yale Journal on Regulation. All errors remain our own. 1

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