Open banking is on the march around the world, with or without the input of regulators.

The promise of open banking is that customers will gain more control of their data in order to share it with third parties, and banks will gain new revenue streams as their services proliferate to more endpoints. Driven largely by APIs, open banking offers banks more control than sharing credentials with third parties, and this control is necessary for banks, who are blamed when accounts are breached.

In the U.S., it is generally held that regulation hinders innovation, but as Mike Whalen, a partner in the law firm Goodwin Procter LLP’s technology group and co-leader of the firm’s fintech practice, told Bank Innovation recently, innovation can come from competing regulations, and some regulations can be created to encourage innovation, as the wave of new charter offerings has shown.

A report released today by Open Banking Project, a partner of this site’s sister accelerator, INV Fintech, lays out a vision for how regulators can work with banks to make open banking happen. Approaches range from hands-off to downright draconian. Different countries demand different approaches, and the report describes four approaches that have worked already and can serve as frameworks going forward.

1. Advocate. This market-driven, standardized approach is being tested in New Zealand. While friendly to banks, this approach calls for buy-in and voluntary funding, so may face financial challenges in implementation.
2. Commander. This is the top-down approach taken by the U.K. — both standardized and mandated. Standardization may hinder innovation, but this approach is generally friendly to fintechs more than banks.
3. Diplomat. Currently being implemented in Singapore, this strategy is market-driven and not standardized. This bottom-up approach leaves a lot of room for innovation, but without mandated funding, could face issues, especially in difficult economic times.
4. Architect. The E.U. is implementing a strategy that is mandated, but does not define standards, meaning the regulator provides the legal and security framework for the regime but not the technical interfaces.

The U.S. is trending toward the New Zealand approach — market-driven, but with standardized interfaces. It is not so much a matter of which framework is the best; rather, if it helps reach a workable solution for the ecosystem players, it will have succeeded. Get the complete report here.