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Switzerland’s industry-led open finance approach is gaining ground, so policymakers have decided not to intervene until June 2024.
In a meeting held last Friday (December 16), Switzerland’s Federal Council said there have been promising open finance developments in the country. Still, more progress should be made in relation to opening up of data interfaces.
As a result, the governing body decided to give the industry one and a half years to make “more concrete progress” and a “greater commitment” to open finance, in particular, to opening up interfaces.
Should the market fail to “sufficiently commit”, the council instructed the Federal Department of Finance (FDF) to submit measures to it by June 2024.
Unlike the EU or the UK, Switzerland does not currently have a legal framework for open banking or open finance that mandates banks to open up interfaces.
However, both policymakers and the industry see open finance as a tool that bears great potential for the Swiss financial services industry in the future and have decided to take a market-led approach.
The focus in Switzerland is on open finance, a FDF spokesperson told VIXIO, adding that it is broader than open banking both in terms of the products covered and the industry participants. For example, plans include wealth management, mortgages and payments products, and also encompasses insurers.
In a February report, the Federal Council acknowledged that the lack of regulatory requirements underpinning consumers’ financial data sharing may be “a little slow at first”, but it said it could pay off in the longer term by concentrating investments in the most promising areas.
For example, Switzerland is already playing a pioneering role in some open finance areas such as custodian bank data, according to the report.
Now the council notes that there have been promising projects launched in areas such as payment transactions, retirement provision, portfolio management and multi-banking.
“The commitment of industry associations and various financial institutions is to be welcomed,” the body said, adding that it “remains confident that a market-based approach can work”.
Along with the announcement, the council also published a list of objectives, put together by the FDF. The objectives are intended to guide the work of market players, strengthen consumers’ control over their data, and promote innovation and competition.
Specifically, policymakers expect the industry to build one common standard per business area, with broad national support and international compatibility.
According to the FDF, the industry association called Swiss Fintech Innovations is coordinating the standardisation of APIs.
Additionally, they want open interfaces to be made accessible for all secure third-party providers at the client's request, and preferably, with the function of "write" in addition to “read”, therefore paving the way for initiation services such as payment initiation.
Policymakers also wish to see scalable interface access, while third-party providers should be able to demonstrate that they have an efficient process in place at a reasonable cost.
Commenting on the objectives, the Swiss Bankers Association said it welcomes the goals in principle and will continue to work towards achieving them.
