.svg)
Some Europeans have welcomed the revision of the Payment Services Directive (PSD2); others believe that it has hampered progress. Consumers are not very aware of their rights to open banking and this remains a huge problem.
Open banking occurs when a consumer opens their bank account data up to a firm that is not their bank. It can be partly credited with the rise of payment services, fintechs and challenger banks.
In part, it has also arisen because of regulatory policy. In late 2015, the EU finalised PSD2, which then came into effect in January 2018.
When he first proposed it, EU commissioner Jonathan Hill said: "This legislation is a step towards a digital single market; it will benefit consumers and businesses and help the economy grow."
However, market insiders who have spoken to VIXIO are in two minds about whether the regulation has modernised financial services.
“It’s still early days. There are only three million people — roughly 5 percent of the banked population — who are engaged with open banking but it’s a great foundation and starting point,” said Brendan Jones, chief commercial officer at Konsentus.
"In Europe, the approach is a purely regulatory approach, so it requires a greater understanding of how to participate. If we compare this with what’s been seen in Australia, Brazil and the UK, all of whom take more of a scheme approach, like specifications and rules about how you participate, and how you onboard, you get much better traction at a much faster rate,” he continued.
Elsewhere in Europe, Switzerland has waited to see whether the market wants open banking. Members of the banking and fintech community there have recently told VIXIO that they do not expect regulators or the government to force open banking on them.
However, Monica Sasso, EMEA chief technologist at Red Hat, believes that all regulations should do what PSD2 has done.
“It has introduced positive competition and forced banks into modernising, as is evidenced by the changes we see in the CMA9 in the UK.
“The directive has allowed people to think differently about their banks and how they make transactions. It has set a precedent for open-banking regulation and governments are now following suit elsewhere in the world, including in the US, Africa and the Middle East."
"The rest of the world is now following Europe on this. PSD2 was a great first step,” said John Broxis, Paris-based Open Banking Europe.
“However, whether open banking has been a success in Europe depends on expectations. Most people think it has gone more slowly than it should and has not delivered on its promise, but the transition toward open banking has been absolutely normal.
“Things take a long time to implement,” he said, referring to the Single European Payments Area (SEPA), and the fact that it has taken a decade to emerge. He thought that delays over SEPA stemmed partly from consumers in Europe not being very aware of, or educated enough about, open banking.
“There is a lack of awareness as to what open banking is. In reality, it’s just another set of rails and consumers need to be educated as to what the benefits are.
“People need to know how to take advantage of open banking rather than a lack of product offering. A cultural change also needs to take place so that people feel comfortable sharing their data.
“Banks historically have been telling people not to share their information, and now they’re being asked to share it. Education needs to take place around data sharing so people know that their information is being shared securely and not being shared inappropriately.”
Although firms and countries are adopting open banking rapidly, it remains one of the best-kept secrets in finance, according to Dan Scholey, chief operating officer at QR payments platform MoneyHub Enterprise.
“This really is a terrible state of affairs because the benefits it affords consumers are immense; we should all be shouting about it from the rooftops. It is as if the industry got off on the wrong foot and has yet to recover.”
By way of an example, Scholey said that when open banking began in the UK there was no public awareness campaign that told people about its benefits. In part, this was because the timing was far from ideal. Open banking began not long after the introduction of the General Data Protection Regulation (GDPR).
“Still, three years on, we should be doing much better, yet survey after survey shows consumer awareness is limited and even those who have heard of open banking are confused about its purpose and benefits,” he said.
“We must make our message simpler and clearer. Open banking really shouldn't be a hard sell: it means consumers can have greater visibility over their finances, enabling them to make better-informed decisions and create for themselves improved financial outcomes. Who wouldn’t want that?”
