We very much welcome this initiative. Just as Europe's PSD2/Open Banking has conquered the world, this new ‘Open Finance’ proposal has the potential to be another world-leading initiative from Europe. As we know, PSD2 mandated all banks to allow third parties to initiate payments and analyse payment data on the customer’s behalf. FIDA now builds on this, going well beyond payments and opening up all financial services.
Certainly. FIDA aims to extend the ‘Open Banking’ concept to encompass all financial services, including insurance, mortgages, savings, investments, etc. That is a tremendous and bold step forward (knowing that even PSD2 is not yet fully working). FIDA will help a user get a better overview of where he is over/underinsured, whether his retirement planning is adequate, whether a re-mortgage might be opportune, etc. This is thus surely very disruptive and will yield huge innovation.
Our manifesto is framed to be applicable in any jurisdiction, not just the EU. We believe any Open Finance regime, such as FIDA, should adhere to three core principles.
Firstly, it should ensure proportionate and horizontal regulation, resulting in a level playing field across all industries, i.e. between Open Finance and Open Data in general. So the starting point must be GDPR, not PSD2.
Secondly, it should be customer-centric, focusing on the advantages to the customer (not so much on the interaction between industry players, as FIDA currently does). The essence should be to give all customers, individuals, and businesses, a statutory right to access their data at any time so that they can reuse it with other service providers if and when so desired.
And finally, it should be technology-neutral. Customers must be allowed to automate their access either with the help of software or a third-party provider. API-based interfaces are currently preferred but regulation must focus on the ‘what’ and stay away from the ‘how’ to ensure reliable and future-proof access.
There are indeed many positive aspects to FIDA. It introduces a new Data Access Scheme to define how data will be unlocked across all financial services. FIDA also introduces a new entity, the Financial Information Service Provider (FISP), and imposes heavy penalties for those who resist opening up their data silos. Finally, it fixes a few issues, like mandating a dashboard to provide users with an overview of all permissions granted to third parties for data access.
Indeed, several critical questions arise. First, there is the issue of how these new FISPs will be regulated. Second, we need to determine who will organise the new data access scheme called for by FIDA – we believe that the EPC's SPAA would be an ideal starting point and it proves that the creation of a scheme can and should be left to the industry rather than getting regulated. Business cases and motivations for participation, which were somewhat overlooked in PSD2, need to be put in place. However, it must be clear at all times that anything made available in a user interface, which a customer has already paid for, cannot be charged for a second time. Just like in SPAA, only additional data and functionality made available in a scheme should be eligible for premium charges. Also details such as ‘who will provide the consumer dashboard’ need to be addressed.
We believe the proposed FIDA Regulation represents a significant step from just opening up payments, now to all financial services, en route to the inevitable opening up of all industries. We know that Europe is unlocking the data from all sectors (government, health, transport, industry, energy, etc) with several horizontal and vertical regulations. This will transform all sectors by allowing new entrants to challenge the established order. Payments, and now financial services, are leading the way and, by adhering to the key principles we propose, FIDA can truly transform all financial services and become another world-leading initiative from Europe.
This editorial piece was first published in the Open Finance Report 2023. We encourage you to download the report and find out the latest trends and developments in the world of Open Banking and Open Finance, as the road to Open Data continues.
Dr. Michael Salmony is a strategic adviser to ETPPA and an internationally recognised leader in strategy of business innovations in digital and financial services with a particular focus on payments, Open Banking/PSD2/Open Finance, fintech, digital identity, e-Invoicing/SCF, AI for financial services and electronic money/CBDC.
ETPPA is the European trade association of Third-Party Providers (TPPs) under PSD2 and beyond. It represents TPP interests vis-à-vis EU authorities and across various European multi-stakeholder groups in support of creating an innovative and level playing field for TPPs.
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