Open Finance Report 2024: our 5 key takeaways
Every November, The Paypers, a leading media in the field of financial information and innovation, releases its much-anticipated Open Finance Report which brings together tens of European experts in digital finance. As usual, the 2024 edition features the latest Open Finance trends, and discusses the opportunities and challenges brought by FiDA. Today, we share our top 5 key takeaways from the report.
Vlad Macovei (Senior Editor, The Paypers) opens the report by stating that 2024 was “a pivotal year in the journey of Open Banking and Open Finance, as the financial world continued to evolve at a breakneck pace. What first emerged as a regulatory mandate in select markets turned into a mature, global movement, redesigning how consumers and businesses access and interact with financial services”.
As explained by the Senior Editor, Open Banking and Open Finance foster an ecosystem of continuous innovation, flourishing partnerships, and improved customer experience. He states: “the potential of an open financial world is vast, and it seems we are still at the beginning of the journey”.
1. Fostering industry collaboration and innovation, with a little push from regulation
Henk Van Hulle (CEO, Open Banking Limited (OBL) – the organization that developed, maintains and promotes the Open Banking Standard in the UK) focused on the latest advancements of Open Banking in the UK, explaining that “the Government has now introduced the Data Use and Access Bill, the UK can lead the next wave of this financial innovation”.
One of his main messages was the fact that “industry collaboration and innovation are already reaping rewards, and a regulatory nudge will support further momentum. This will help to increase engagement with all financial services, as well as build trust and familiarity with data”.
2. The main discussions in the FiDA proposal
Emanuel van Praag (Attorney-at-law, Kennedy Van der Laan) and Eugerta Muçi (PhD Candidate, Erasmus University Rotterdam) highlighted what they consider to be the main discussions points that are still open in the FiDA draft proposal, and which could eventually lead to an efficient Open Finance ecosystem. Some of these points are:
- FiDA readiness – the experts suggest three phases: start with standardized data and build upon the PSD2 experience, then, include those that are not fully standardized and complex, and finally, add complex and heterogeneous data with much less standardization.
- Data access within vs. outside schemes – an important discussion point relates to whether data access can also take place outside schemes and, if yes, can data holders get paid for it and the answer is not clear from the current text.
- Gatekeeper access – the ECON Committee proposes to prohibit gatekeepers (big tech companies like Google, Amazon, Meta, etc.) from obtaining the FISP status and access Open Finance data. The initial version did not mention them at all. This amendment limits gatekeepers’ access to new sources of data that would reinforce their market position. It would also maintain a level playing field with financial incumbents who do not enjoy the advantages of comparable vast customer databases.
- Etc.
3. Key developments in the US
Vlad Macovei (Senior Editor, The Paypers) discussed Open Banking in the US as especially the transition to the CFPB final rule. As explained by the Senior Editor, “the final rule is considered a game-changer […]. The new regulation seeks to level the playing field for all consumers, regardless of which bank they use”. This notably means that the “US consumers can now give specific consent for data usage by specific for data usage by specific third parties, while the rule strictly prohibits secondary uses outside of improving the solution covered by the initial consent”. Also, if the consumer does not renew his/her consent after 12 months, the third parties must stop data collection and delete all data that was previously authorized.
Yet, and even if the rule was welcomed by the fintech world as well as end consumers, it was also criticized right away by the Bank Policy Institute and Kentucky Bankers Association that filed a lawsuit against CFPB for “jeopardizing customers’ privacy and account security with its new rule”. Moreover, with the reelection of Donald Trump as president of the US, the CFPB pushes to have the rule approved before the new administration actually takes office and sends efforts back if the past is any indicator.
4. The SPAA Scheme: a transformative step of Europe’s payment ecosystem
According to Oana Ifrim (Lead Editor, The Paypers), “SPAA is designed to create a balanced, revenue-generating ecosystem where Open Banking can thrive, driving a new wave of payment innovations across Europe”. As SPAA introduces ‘premium APIs’ adding enhanced features to the free (and basic) APIs required by PSD2, it will allow financial institutions to monetize their investments in Open Banking, making the framework not only sustainable but appealing to a broader market.
Oana Ifirm also focused on one of SPAA’s standout features: Dynamic Recurring Payments, or DRP, which give users a “flexible, user-friendly payment experience, that’s perfect for today’s e-commerce and subscription-based economy”.
5. Concrete Open Finance use-cases
The LUXHUB experts once again had the opportunity to share their knowledge and Open Finance expertise. In this edition of the Report, Anne-Sophie Morvan (Chief Commercial Officer) and Alexandre Keilmann (Marketing Manager) discussed “how FiDA opens unprecedented opportunities”, and shared 5 innovative and concrete Open Finance use-cases. They highlighted, and asked: “We know about Open Banking and have heard about Open Insurance and Open Wealth initiatives, but are we entering the era of Open Everything?”
Here are the 5 use-cases:
- Enhanced credit scoring
- Suitability & appropriateness assessment
- Investment advice
- Carbon footprint tracking
- Subscription management