Voice of the Industry

FIDA: Europe's approach to Open Finance

Monday 20 November 2023 11:42 CET | Editor: Vlad Macovei | Voice of the industry

Panagiotis Kriaris dives deep into the highly expected FIDA regulation and how it will impact Open Banking's transition to Open Finance.


Panagiotis Kriaris dives deep into the highly expected FIDA regulation and how it will impact Open Banking's transition to Open Finance.


The transition from Open Banking to Open Finance is one of the hottest topics in finance right now and for good reason. In Europe, although Open Banking has been established via a directive (the famous PSD2), the transition to Open Finance is taking place in a broader context (via a regulation – the so-called FIDA). 

Let΄s try to understand how this has been unfolding and what is to expect.


The background

But first, let’s take a step back. 

The disruption that we have witnessed in financial services over the past ten to fifteen years clearly started before Open Banking. But the introduction of Open Banking has been what we call a game changer. Not yet fully recognisable in terms of impact, but certainly in terms of changing the playing field. 


By means of democratising (through regulation) access to data so that innovation can be built on top as an additional layer. In practice what PSD2 tried to do was to open up the data held by banks to third-party players (i.e. fintechs), so that they can build new products and services on top. 

In this sense, Open Banking has been a key enabler of what we call ‘APIsed finance,’ which is the evolution of financial services into open APIs, and the ensuing restructuring of the value chain.

The main reason why this matters is that this open approach has been (and still is, given that the transformation is not over) a catalyst in helping metamorphose financial services from an industry of vertical silos and legacy infrastructure to an open ecosystem.

Today’s financial services are synonymous with apps, running on the cloud and being closely intertwined with other apps through marketplaces, ecosystems, or partnerships using APIs as the connecting glue.


Open Banking vs. Open Finance

Let΄s now get to Open Finance. 

PSD2 (as well as its successor, PSD3) targets and focuses on payment services. 

Open Finance is the next, more mature phase of the journey and goes far beyond by addressing different and more complex use cases – savings, lending, investments, insurance, etc. – under one digital dashboard with hyper-customised services that consumers and businesses entrust with third parties. 

In this transition or transformation process, data is by far the most significant element. Data has always been the outcome of the financial services life cycle, in every step of the journey, however not any kind of data can be used within this new open context. It is rich, actionable data that is easy to be re-used, re-distributed, and seamlessly integrated not only within banking or payments but also across different, commercial environments going beyond finance, which makes a big difference.

Scheme 1: From Open Banking to Open Finance

Source: WhiteSight

And this is exactly the reason why data sits at the epicentre of Europe’s effort to transition to Open Finance. FIDA is basically a data regulation: Financial Data Assets Regulation.

Scheme 2: What’s wrong in the financial sector’s data flow today

Source: European Commission

What is FIDA?

As part of Europe’s broader digital finance and data strategy, FIDA aims to create a legislative framework to ‘bring payments and the wider financial sector into the digital age’ by means of facilitating the sharing of and access to customer financial data, addressing both consumers and businesses.

The main elements of FIDA are the following:

  • Consumers will be able to securely share their data (with banks, fintechs, etc.).

  • Nearly all financial services data will be within its scope, which (as explained) is the main difference with PSD2.

  • Data is defined as data both supplied by the customer and stemming from customer interactions.

  • Unlike PSD2 & PSD3, which only apply to banking institutions offering online-accessible accounts, FIDA extends its scope to include institutions across the entire industry.

  • Firms can play a dual role – that of the data holder and the data user.

  • Data holders will be able to ask for reasonable compensation for making data accessible to data users.

  • Data users will have ‘read access’ but will not be able to initiate transactions on behalf of customers.

  • Customers will be in full control of their data (remission dashboard to view and manage access).

Scheme 3: How FIDA can fix the data flows

Source: European Commission

Why is FIDA important?

FIDA is important because of three key novelties: 
  1. it enables customers to control the use of their financial data.

  2. it allows financial institutions to charge other service providers (i.e. fintech players) for data access granted by customers, which was always a big point missing from PSD2 (and one of the main disincentives of banks to invest in Open Banking). 

  3. It promotes high-quality APIs and enhances the data quality overall. 

It’s important to note that although FIDA will be driving Europe’s transition to Open Finance, this will be done in conjunction with PSD3, as there is a high degree of complementarity between the two: both foster the opening up of choice and control of customers over their financial data. 

It needs to be underlined that all these are not going to happen from one day to the other. FIDA is still a draft and is not likely to be finalised before 2025. Then, implementation timelines kick in as well, with provisions relating to the financial data-sharing schemes being applied 18 months after FIDA enters into force, whereas all other requirements will start to apply after 24 months.

Hence, FIDA will take time. And there are many questions to be answered, lots of challenges to be resolved and a high degree of complexity. Plus, the fact that unlike other jurisdictions (i.e. the UK or Australia), everything in Europe will take place in one go, without the flexibility that a phased approach could offer. But the stakes are very high and the potential even higher. 

About Panagiotis Kriaris

Panagiotis has spent his career in the borderline between business and technology with a leadership background at an international level. Panagiotis brings senior expertise across financial services, banking, payments, fintech, retail and ecommerce. Innovation, strategy, business development, strategic partnerships and building businesses and products from scratch have been at the center of his work and attention throughout his career. Being a recognised voice in the financial services industry, Panagiotis has contributed to various publications and podcasts and is often invited as a public speaker at events around the globe.

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Keywords: FIDA, Open Banking, Open Finance, financial data, regulation
Categories: Banking & Fintech
Countries: Europe
This article is part of category

Banking & Fintech