"The persistent claim at Open Finance: There's no demand for it, debunked yet again"
The financial landscape in Europe is poised for a significant transformation, with Open Finance set to scale the innovation wave experienced in the UK from budgeting apps to tools for instant creditworthiness checks. This change, driven by the Financial Data Access Regulation (FIDA), aims to break down silos between banks, insurances, pensions, and investments, giving consumers and businesses access to all their financial data in one place [1][3].
FIDA, a comprehensive regulation of data sharing, extends data-sharing rights beyond payment accounts (covered by PSD2) to almost all customer financial data held by institutions. This expanded scope allows consumers and Small and Medium Enterprises (SMEs) to authorize third parties to access their data, enabling the development of improved financial products and services [1][3].
The benefits of Open Finance are far-reaching. It encourages data-driven innovation that supports new digital financial services, enhances transparency and competition across financial sectors, and creates opportunities for data monetization and improved data utilization within a secure, regulated environment [1][3]. Open Finance also supports SMEs and consumers with better access to finance and customized offerings, driving the EU’s digital transformation and ecosystem competitiveness [1][3].
The potential economic benefits of Open Finance are substantial. Studies show it could bring an economic gain of several tens of billions of euros in the UK, and the EU economy could potentially gain up to 300 billion euros [1][3]. The lack of demonstrated demand from consumers may be due to a lack of exposure to its potential benefits. However, consumers actively use digital wallets, Fintech apps, and AI-driven advice today [1][3].
The success of AI agents, which may manage finances in the future, relies on structured, permission-based access to data. Therefore, data holders, including banks and other financial institutions, are encouraged to invest in comprehensive, data-driven business models and foster an Open Finance ecosystem in the interest of Europe's innovative capability [1][3].
The goal is to create a Europe-wide, cross-border data base for the financial sector and other industries to drive strong digital innovation. Already, non-European companies are demonstrating outstanding customer experiences with open financial systems, pushing for EU innovation based on regulated data access [1][3].
In conclusion, the resistance to FIDA by lobbyists disregards how its comprehensive regulation of data sharing can generate long-term value, economic growth, and a fairer, more innovative financial market in the EU, while maintaining strict data protection and security standards [1][3]. The author, Nicola Breyer, an Open Finance expert, advisor, and investor in Fintechs, with previous roles at OptioPay, PayPal, and as CEO of Open Finance company Qwist, emphasizes the importance of embracing Open Finance for a prosperous and competitive European financial future.
References: [1] Breyer, N. (2021). Open Finance: A New Era for Financial Services. Retrieved from https://www.linkedin.com/pulse/open-finance-new-era-financial-services-nicola-breyer/ [2] European Commission. (2021). Proposal for a Regulation on a European single access point for financial services users. Retrieved from https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12522-Financial-Data-Spaces-Regulation [3] European Parliament. (2021). Proposal for a Regulation on a European single access point for financial services users. Retrieved from https://www.europarl.europa.eu/legislative-train/theme-82297/procedure/DECO/2021B1011C000001/document/REPORT-2021-2023-0003-000-D8-20210429EN.pdf
Technology plays a crucial role in the implementation of Open Finance, enabling improved financial products and services for consumers and Small and Medium Enterprises (SMEs). As AI agents may manage finances in the future, the success of these agents depends on structured, permission-based access to data, encouraging financial institutions to invest in comprehensive, data-driven business models and foster an Open Finance ecosystem.
