EU Payments Proposal Contradicts Open Finance Framework And Data Act, Banking Groups Warn

November 6, 2023
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Allowing free access for third-party providers distorts a level playing field and goes against other legislation, banking groups have warned regarding the EU’s Payment Services Regulation.

Allowing free access for third-party providers (TPPs) distorts a level playing field and goes against other legislation, banking groups have warned regarding the EU’s Payment Services Regulation (PSR).

Sources in Brussels have previously said that the revised Payment Services Directive (PSD2) was the most lobbied against piece of legislation, and, with its new iterations — the PSD3 and a new Payment Services Regulation (PSR), the EU’s banking lobby is once again dissatisfied. 

Feedback submitted to the European Commission by the Swedish Bankers Association and Finance Denmark criticises the fact that fintechs will still be able to access payment account data from banks without being charged. 

This has been a contentious topic since work began on PSD2, as well as in the UK on open banking more generally.

“The proposal broadens the scope of what information collected by an account information service provider (AISP) can be used for,” says the Swedish Bankers Association's submission, pointing out that account servicing payment service providers (ASPSPs) will continue to provide information and maintain infrastructure to a growing market of services.

In addition, the Swedish banking lobby notes that there are requirements for ASPSPs to provide a dashboard for account access. 

“The costs of developing and maintaining the PSD2 interfaces have been, and will continue to be, significant. In order to achieve a level playing field, ASPSPs should be able to compensate for their costs,” the group says. 

Finance Denmark argues that the PSR contrasts with the European Commission's proposal for a regulation on a framework for financial data access (FIDA), and points out that the EU’s Data Act allows for compensation for parties sharing data. 

FIDA was released at the same time as the commission’s PSR and PSD3. Within this, the commission has set out a framework that it hopes will establish clear rights and obligations to manage customer data sharing in the financial sector beyond payment accounts.

The Data Act, meanwhile, establishes common rules to govern the sharing of data generated by the use of connected products or related services, such as the internet of things (IoT). 

The regulation was created to ensure fairness in data sharing contracts and to allow public sector bodies to use data held by enterprises where there is an exceptional need, such as a public emergency. 

The provisional agreement was approved by the Council of the EU and the European Parliament in July this year. 

Lawmakers in the parliament are due to formally endorse the new legislation this month. 

Sharing value and risk fairly

“In the FIDA-proposal it is proposed that there should be a possibility for contractual relationship and the possibility of charging for access to data as reasonable compensation. Finance Denmark believes that it is crucial that the same principles for data sharing apply to all services and sectors,” says the trade association, whose membership includes key retail banks such as Danske Bank and Saxo Bank. 

The Swedish Bankers Association’s submission reflects that of its Danish counterpart, and says that fair distribution of value and risk, in line with the Data Act and FIDA, would provide incentives for ASPSPs and provide a basis for future market development by delivering and maintaining high-quality application programme interfaces (APIs), without disrupting the business models of TPPs. 

The banking lobby group says that it is “highly reasonable” that companies that benefit from banks’ infrastructure that they are compelled to provide should pay for their use. 

“Nothing prevents these actors from charging end users for their services in turn,” the Swedish Bankers Association says. 

Finance Denmark suggests that APIs which are used by TPPs to access banks will need to be continuously maintained, updated and further developed. 

This is in part due to cybersecurity and operational robustness, the trade association says. 

“It should therefore be possible for account servicing payment services providers to enter into contracts with payments institutions and they should be given the possibility of charging for access,” Finance Denmark suggests, arguing that this will support high-quality APIs and ensure continued development of the open banking market to the benefit of all players and customers.

According to the Swedish Bankers Association, the consequence of this imbalance becomes even more obvious in the corporate segment.

Here, the group cautions that banks have to develop solutions free of charge for the TPPs that are then sold on at a more competitive price than what the ASPSP would be able to, having to bear all cost for development, maintenance and support.

The Scandinavian banks' point of view inevitably contrasts with that of fintechs, where there is a sense that banks still have the upper hand. 

At times, this has resulted in fallouts, particularly over poor performing APIs, which fintechs have complained that little has been done about by national regulators. 

In its initial feedback on FIDA, Swedish fintech Klarna criticised the European Commission for prioritising “pleasing big banks over putting consumers' best interests at heart”, due to the fact that API access comes at a premium in the proposal. 

The current system is a contentious topic and one that regulators seem unable to make up their minds on. PSD4, or PSR2, may be when the EU changes its stance. 

Meanwhile, in the UK, regulators have been accused of avoiding the issue by not including it in proposals in the Joint Regulatory Oversight Committee’s (JROC) open banking roadmap, which was published in April. 

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