Open banking moved into the spotlight in June this year, when the European Commission (EC) put forward a proposal to revise the Payment Services Directive (PSD2). The new generation of the directive, PSD3, which will be accompanied by the Payment Services Regulation (PSR), aims to improve consumer protection and competition in electronic payments. Now, two months later, with the dust (sort of) settled, the industry has had a chance to chime in. Here’s what some regulators and insiders have to say.
In a speech to the European Parliament that preceded the publishing of the proposal, European commissioner for financial stability, financial services, and the Capital Markets Union Mairead McGuinness gave a sneak peek into the thought process guiding the EC’s decisions.
Stating that open banking has yet to reach its potential, she points out that the sector started growing more than 10 years ago, yet, in 2021, less than five per cent of consumers in the EU were using its services. The proposal is thus “essentially about embracing the possibilities that data can offer in financial services”. Before that can happen, however, privacy, security, and infrastructure issues – which she cites as reasons for the low adoption of open banking – have to be resolved. The EC’s aim is to “fix these problems, without causing significant cost or disruption to those already engaged in open banking”.
Deloitte’s contribution was a comprehensive look at open banking initiatives around the world. Published by the firm’s EMEA Center for Regulatory Strategy, it observes that jurisdictions outside of the EU and Europe are “adopting their own approaches” that “reflect their markets and objectives, and in some cases developing cross-industry approaches beyond financial services”. These initiatives fall broadly into two categories: market-driven, or regulatory-driven.
Deloitte’s article ends with a conclusion for both regulators and firms involved in open banking. Regulators will have to “break down their own sectoral and geographical siloes and put the protection and fair use of customer data at the top of their agenda”, while firms should “recognise that from now on putting customers fully in control of their ‘data lives’ will be both a commercial and regulatory imperative”.
As a player in the space of Application Programming Interface (API), Robert Sullivan unsurprisingly argues in an opinion piece that APIs “offer the most secure and performant way for third-party providers to interface with banks” and that they will “pave the way for higher quality and more innovative end-user propositions”. The public policy and strategy director at API provider Token.io thus welcomes the EC’s proposal to make it obligatory for banks to provide an API-based open banking interface, which would remove the alternative option of modified customer interfaces.
Robert Sullivan also expresses agreement with the structure of the new proposal, which sees most of the open banking rules moving from being a part of the PSD3 directive to being under the PSR regulation. According to him, regulations are “applicable to every member state and not subject to transposition into local law”. This, he writes, should reduce the divergence in the interpretation and implementation of rules between different member states. The development will be welcomed by third-party providers that operate across multiple member states.