With its proposal for a regulation on a framework for access to financial data (Financial Data Access – “FiDA”), the European Commission wants to give the principle of open banking a significant boost. It is modelled on access to payment accounts as granted by the 2nd Payment Services Directive (“PSD2”) and, correspondingly, the Payment Services Supervision Act (“ZAG”), although the Commission envisages completely different access mechanisms in the FiDA.
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FiDA in a nutshell
The Commission’s proposal provides for financial institutions to grant other financial institutions and so-called financial information service providers access to the data they hold on their customers’ financial transactions (“customer data”), subject to a corresponding customer order.
Almost all-encompassing scope of application
The term “financial institutions” within the meaning of the draft FiDA includes credit, payment and securities institutions, capital management companies and insurers together with insurance intermediaries, i.e. virtually the entire financial industry.
The customer data to which access must be granted is all data collected, stored or otherwise processed by a financial institution in the course of its normal business activities relating to – to put it simply – the financial transactions of its customers in the broadest sense. The source of the data is irrelevant here, meaning that data generated by the financial institution itself must also be made available.
Data exchange via “systems”
According to the Commission’s proposal, data will only be exchanged within so-called systems. These are primarily made up of data owners, i.e. those financial institutions that have to disclose “their” data, and data users, who in turn want to use the data of the data owners, as members. In order for a scheme to be recognised, the two member groups must represent a “significant share of the market for a product or service”. The systems set their own rules and regulations, which determine the technical requirements for data exchange and upper limits on the remuneration for retrieved data. The Commission sets strict limits for the latter.
Compulsory membership of a scheme
Financial institutions are obliged to become members of at least one scheme.
Multiple memberships are possible, which – should there be any economically relevant parallelism between different systems – is likely to be of interest primarily to data users.
Of course, a financial institution can belong to a system both as a data owner and as a data user.
The systems are open to new members at any time; the legislator expressly wants to avoid closed shops to restrict data access.
Remuneration for the exchange of data
In contrast to PSD2 and the ZAG, access to customer data is not free of charge for data users. Instead, data owners can demand payment for the provision of “their” customer data. The maximum amount is determined by the members themselves. However, the framework granted to them by the FiDA is narrow, so that one thing can be predicted with certainty: This will certainly not result in a lucrative business model for data owners.
Prospects
In addition to the considerable effort that data owners in particular will have to make their data available, the FiDA harbours opportunities for a wide range of market participants. This applies not only to innovative new business models in the FinTech sector, which know how to handle large volumes of data and capitalise on them. Prospects are also opening up for “traditional” market participants.
More holistic approach to financial advice
FiDA will undoubtedly further promote a holistic approach to services and, in particular, advice from a wide range of financial institutions. Easier access to customer data held by other service providers will of course make it much easier for them to take this into account when providing their own services.
Family offices as financial information service providers
For family offices, standardised electronic access to their clients’ financial data holds great potential. However, if they do not have a licence as a securities institution, they would first have to obtain a licence as a financial information service provider in order to become a member of a FiDA system. The FiDA requires a complex administrative procedure with the national supervisory authority before such authorisation can be granted. As part of this procedure, it must be demonstrated in detail that sufficient technical and organisational measures have been taken to secure the client data obtained.
Non-bank asset managers
Bank-independent or external asset managers (EAMs), who are dependent on the data of their clients’ custodian banks due to their business model, could also benefit from technically standardised access to client data. However, for FiDA to become really exciting for them, they would also have to be able to not only retrieve data, but also place orders – similar to payment initiation services.
Genuine open banking versus a one-way street
In order to realise “genuine” open banking, the one-way street that has been envisaged to date would have to be opened up in both directions, figuratively speaking. The systems should not only be used to provide data, but also – to stay with the metaphor – to transmit orders in the opposite direction. The Commission’s intention to promote competition and create a level playing field for all players on the financial market is unlikely to be realised effectively and comprehensively with the current draft of the FiDA.
