The EU Court of Auditors shares its views on Open Banking
Through its Special report 01/2025, entitled “Digital payments in the EU”, the European Court of Auditors focused on the progress that has been made in making digital payments safer, faster and less expensive. The European Court of Auditors also underlines that several gaps remain, while highlighting the key issues to solve for Open Banking to thrive.
In the evolving landscape of Open Banking within the EU, recent analyses have identified significant challenges limiting its potential growth. These challenges include the lack of standardized API frameworks, insufficient monitoring and implementation oversight, and a data access model that is free-of-charge but may discourage banks due to cost, competitive concerns, and regulatory burdens.
Three key issues highlighted by the European Court of Auditors on Open Banking
1. Absence of a Standardized API Framework
Unlike the UK, which has established a unified API (Application Programming Interface) framework through the Open Banking Implementation Entity (OBIE). “As noted by the EBA, the absence of a single standard has led to the emergence of different interface solutions across the EU and contributed to market fragmentation” as stated by the EU Court of Auditors. Thus, making the overall transfer information of data far more complicated.
2. Weak Monitoring and Implementation Oversight
The EU has been struggling to effectively monitor Open Banking due to a lack of unified mechanisms across each country. Overall, there is insufficient data on the availability, performance, and user adoption of APIs. This gap in information makes it difficult to truly evaluate the impact of Open Banking on the financial system.
3. Free-of-Charge Data Access Model
PSD2 requires banks to provide third-party providers (TPPs) with free access to customer data, without any financial compensation. While this was originally intended to reduce entry barriers for fintech companies, it has resulted in decreased motivation for banks to invest in high-quality API infrastructure.
Key recommendations made by the European Court of Auditors
1. Establishing a unified EU-wide API standard
The establishment of a unified EU-wide API standard would ease the development of Open Banking and reduce market fragmentation. By doing so, this would facilitate seamless integration across various financial institutions and service providers, reducing inefficiencies coming from inconsistent national implementations.
2. Introducing reasonable compensation mechanisms
This would encourage data providers to invest in high-quality infrastructure. Currently, banks bear the costs of maintaining secure and reliable APIs without direct financial returns, which discourages significant investments from being made on the banks side.
3. Strengthen monitoring and data collection efforts
Financial institutions should be required to report their API performance and adoption rates to a central EU authority. A transparent and standardized method for tracking Open Banking usage would give regulators the insights needed to adjust policies and tackle emerging challenges.