The Shifting Sands of Open Banking: Strategic Reallocation in a Fragmented U.S. Market

The U.S. open-banking sector, once hailed as a beacon of financial innovation, is now a cautionary tale of regulatory whiplash and economic fragility. Visa's abrupt exit from the U.S. open-banking market in 2025—citing “regulatory uncertainty and rising economic risks”—has crystallized the sector's instability. This move underscores a broader trend: capital is fleeing a fragmented U.S. landscape and flowing toward markets with clearer rules and scalable infrastructure. For investors, the question is no longer if to reallocate, but how to navigate the transition.

The U.S. Open-Banking Quagmire

The collapse of the CFPB's 2024 Section 1033 rule—a mandate requiring banks to share customer data freely with third-party fintechs—has left the U.S. open-banking model in disarray. The Trump administration's reversal of this rule in mid-2025 introduced a fee-based data-sharing framework, upending the economic assumptions of fintechs and payments firms. JPMorgan Chase's announcement to charge fintechs hundreds of millions for data access further amplified the crisis, threatening the viability of low-cost open-banking models.

Regulatory fragmentation has compounded the problem. Without a unified federal framework, companies now face a patchwork of state laws and commercial agreements, inflating compliance costs and stifling innovation. The CFPB's accelerated rulemaking and privacy-focused agenda have created a climate of unpredictability, forcing firms like Visa to pivot to regions with more stable ecosystems.

Strategic Reallocation: Beyond the U.S.

Visa's exit to Europe and Latin America highlights a global shift in capital toward markets with mature open-banking infrastructure. The EU's PSD2/PSD3 frameworks and Brazil's open-finance ecosystem offer regulatory clarity, scalability, and institutional support. These regions are not just safe havens—they are laboratories for the next phase of fintech evolution.

1. Resilient Fintech Partnerships

In Latin America, B2B2C models are redefining financial inclusion. Independent representatives (reps) act as trusted intermediaries in rural and underserved areas, enabling fintechs to scale without the overhead of physical infrastructure. Embedded finance, particularly in e-commerce and mobile platforms, is also gaining traction. For example, WhatsApp and Instagram integrations for microloans and insurance are creating new revenue streams while expanding access.

2. Regulatory Clarity in Emerging Markets

Latin America's regulatory sandboxes and AI-driven compliance tools are attracting capital. Brazil's open-finance ecosystem, for instance, mandates data portability and interoperability, creating a level playing field for startups and incumbents. Mexico and Colombia are following suit, deploying RegTech solutions to automate KYC/AML processes and reduce compliance costs. Investors should prioritize startups that align with these frameworks, as they are better positioned to weather future regulatory shifts.

3. Alternative Data Solutions

AI and machine learning are transforming credit assessment in emerging markets. Startups are leveraging alternative data—such as mobile phone usage, social media behavior, and payment history—to serve underbanked populations. These tools not only expand financial inclusion but also mitigate fraud risks. The rise of “explainable AI” is particularly noteworthy, as regulators and customers demand transparency in algorithmic decision-making.

The Path Forward for Investors

The U.S. open-banking sector remains a high-risk, high-reward proposition, but its future hinges on regulatory resolution. Until the CFPB's ANPR process concludes, investors should treat the U.S. market as a speculative bet. Meanwhile, the following strategies offer more immediate returns:

1. Geographic Diversification: Allocate capital to regions with stable open-banking frameworks, such as the EU and Latin America. Brazil's open-finance ecosystem, in particular, is a high-growth opportunity.
2. Partnership-Driven Models: Invest in fintechs leveraging B2B2C and embedded finance to scale in fragmented markets. Prioritize companies with strong local partnerships and distribution networks.
3. RegTech and AI Integration: Support startups developing AI-powered compliance tools and alternative data solutions. These firms are critical to navigating the evolving regulatory landscape and expanding financial inclusion.

Conclusion

Visa's exit is a wake-up call for the fintech industry. The U.S. open-banking model, once a symbol of disruption, is now a case study in regulatory overreach and economic fragility. For investors, the path forward lies in strategic reallocation—shifting capital toward markets with clarity, resilience, and innovation. The future of financial technology will not be defined by the chaos of the U.S. but by the adaptability of players in regions where rules are written, not rewritten.