FIDA Regulation in focus: What Banks, FinTechs, and consumers need to know
In the coming months, new regulations and laws introduced by the European Commission will fundamentally impact the financial sector and its stakeholders. The PSD3 (Payment Service Directive 3), FIDA (Financial Data Access), and PSR (Payment Services Regulation) are set to launch with the goals of harmonization, increased security and transparency, and further transformation of the financial sector.
How Do PSD3, PSR, and FIDA interconnect?
All three regulations significantly expand the scope and range of data exchange and cooperation in the financial sector. However, PSD3, PSR, and FIDA are not isolated regulations but rather part of an interconnected regulatory framework. While PSD3 and PSR govern payment services and account data, FIDA extends the scope to a broader financial data landscape. Additionally, these regulations foster innovation, competition, and efficiency while simultaneously enhancing consumer control over their data.
The EU legislative process for FIDA is currently in full swing and is expected to reach a final text as early as the beginning of 2025, and have it adopted into law by mid-2025. From the publishing date onwards, the proposed timeline is 18 months to finalize the setup of the “data sharing schemes” envisaged by the regulation, followed by a further 6 months to participate in the schemes to achieve full compliance.
What does FIDA mean for market participants?
The FIDA regulation obliges financial data holders – including banks, insurers, asset managers, and other financial sector participants – to make financial and customer data from both private and corporate clients accessible to authorized data users through standardized interfaces. Unlike PSD2 or PSD3, it will be permissible to charge a fee for this data exchange, and it is expected, it’s part of the responsibilities of the “data sharing schemes”.
Data users typically include FinTechs that develop data-driven financial solutions like analytics or aggregation services, but financial institutions themselves can also act as data users. Access to data is contingent on the data user being licensed as financial information service provider and the explicit consent of customers to share their data. Thus, FIDA is closely aligned with GDPR and the consent mechanisms outlined in the Payment Services Directive.
Furthermore, FIDA mandates data holders to provide their customers with a digital dashboard. In this dashboard, consumers can see at any time which data consent they have granted and revoke it if necessary. The dashboard could either be integrated directly into data holders’ existing systems, such as online banking, or provided via a central platform that bundles information and data consent from all providers in one place.
By doing so, FIDA not only promotes innovation and competition but also strengthens consumer protection by enhancing data privacy and security in the digital financial sector.
FIDA from finAPI’s perspective: Opportunities and Challenges
The broader data sharing mandated by FIDA is fundamentally positive. The data now extends beyond banking information to include data points on mortgages and credit contracts, savings and investment products, crypto-assets, private and company pension plans, insurance products (excluding life and health insurance), credit assessments, and non-sensitive KYC data.
As a pioneer in banking APIs, finAPI has first-hand experience of how PSD2 and the opening of bank data improved competition, enhanced user experience, and expanded access to financial products. A similar impact can be expected from FIDA, benefiting both consumers and providers.
However, the introduction of PSD2 several years ago highlighted the importance of clear regulations from the outset. The notion that “the market will sort it out” led to numerous questions and uncertainties for all parties involved during the early stages of PSD2.
Unresolved questions about the FIDA Regulation
To prevent uncertainties and avoid leaving the market to resolve issues independently, the following points should be clearly addressed in the final regulation:
- What specific data must data holders provide, and to what extent?
- How should the consent dashboards and “Financial Data Sharing Schemes” be implemented?
- To what extent and in what manner can data holders charge fees?
Shaping the Future of Open Finance together
The FIDA regulation holds tremendous potential to advance the financial sector by fostering innovation and giving consumers greater control over their data. At the same time, reflecting on PSD2 demonstrates the importance of clear frameworks and a harmonized approach for the success of such initiatives.
As a member of the Open Finance Association (OFA) and the Digital Lending Association (DLA), finAPI is committed to proactively addressing these challenges and collaborating with decision-makers to develop practical solutions. We firmly believe that, with thoughtful implementation and close cooperation among all stakeholders, the FIDA regulation can lay the groundwork for a stronger and more inclusive financial landscape. Our goal is to support our clients on this journey and help them fully leverage the benefits of Open Finance.
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