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A senior official at the European Commission said that 2023 will be the year that it goes forth with its open finance framework, as the industry urges a beneficial transition from open banking.
“We are very much in listening mode and trying to reflect on the best way forward,” said Raphael Lemahieu, policy officer at the European Commission, while speaking at the QED’s conference on Open Finance in Brussels.
The commission is currently considering a legislative proposal for open finance, which is part of the EU’s 2020 digital finance strategy.
Open finance is a next step forward from open banking, which was supposed to be enabled in the EU through the revised Payment Services Directive (PSD2). It would mean financial data such as mortgages, savings, pensions, insurance and consumer credit being opened up to application programming interfaces (APIs).
The commission has just completed a consultation process regarding the issue, which ran in conjunction with a review of the PSD2’s effectiveness.
“We’re very conscious that open finance is part of the bigger picture,” Lemahieu continued. “Any open finance proposal is considered a complement to the other measures put out as part of the commission’s data strategy.”
Open finance will build on legislation, such as the Data Governance Act and the Digital Markets Act, he suggested, arguing that this is important as the expectation from the market is that it is not created in a siloed way and is part of an open data ecosystem.
In addition, Lemathieu said that the commission is considering open finance in the context of lessons that can be learned from PSD2.
“We have seen new products and services being developed and a new ecosystem of third-party providers. This is all very new and this is innovation that we see building off of PSD2,” he said.
“However, we are equally conscious of voices in the market who have raised concerns about the cost and the time associated with building the infrastructure of PSD2.”
The PSD2 review will lean into the commission’s thinking on open finance, he said.
Lemathieu also stressed that the commission wanted to get the benefits and risks balanced right in its legislation.
“Open finance is a very interesting potential, where you can move towards products that are more tailored and personalised.”
For Louise Beaumont, who serves as Mastercard’s open banking and finance chief, open finance means the “death of the big product eventually”, with power instead going to the data creator.
Services will become hyper-personalised and really valuable to consumers at an individual level, she said. “They’re about you, they’re powered by you.”
Beaumont urged for balance as well, but in this instance between public and private sectors.
“We need to get the balance right between regulator-led and market-led,” she said.
There needs to be a balanced open finance market place where regulation is protecting consumers and businesses.
Meanwhile, market participants should be driving the setting of technical standards, she said.
To mark Consumer Protection Day (September 23) in the EU, Mairead McGuinness, the commissioner responsible for financial services, said that open finance was one of her department’s priorities.
“That openness on data is based on keeping the customer in charge of their own information,” she commented, outlining the possibilities for open finance in the EU.
“In developing our approach to open finance, we are taking the time to listen to all sides with an inclusive, bottom-up approach.”
McGuinness said that following engagement with stakeholders through consultations, a group of experts is now advising the commission on specific use cases that would benefit both consumers and financial institutions.
“And we expect the expert group's final report to come later this year,” she confirmed.
