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The European Council has reached an agreement on the proposed Financial Data Access (FIDA) framework, which lays out the transition from open banking to open finance in the trading bloc.
Brussels insiders had expected FIDA to be the slow burner of the regulations released by the European Commission as part of its payment services package in June 2023.
However, it has apparently moved ahead of the Payment Services Regulation (PSR) in terms of priorities for legislative finality, as the EU finance ministers have given the greenlight for negotiations with members of the European Parliament to start.
The Council’s position on FIDA largely remains loyal to the Commission's initial proposal, emphasising a phased implementation approach.
Key elements include clarifying the scope by defining specific datasets, products, and sectors under the framework, and it also offers flexibility for member states, allowing them to opt into the regime for certain data types, such as occupational pensions.
Additional features include time limits on sharing non-digital customer data, enhanced regulation of foreign financial information service providers (FISPs), and strict supervision of gatekeepers to ensure fair competition.
The Council does not seem to have gone as far as the European Parliament’s ECON Committee, however, which advocated that digital platforms designated gatekeepers under the EU’s Digital Markets Act (DMA) should not be able to become FISPs.
This would mean that Alphabet, Amazon, Apple, ByteDance, Meta and Microsoft would be excluded from the framework.
According to the ECON Committee, these platforms' dominant online position makes it virtually impossible for businesses to reach end-users if not through their gateways, and their exclusion aims to ensure that they could not circumvent the rules to control open finance markets.
The decision, made as ECON Committee members voted through their negotiating position on the FIDA framework on April 18, garnered disapproval from trade associations at the time for being disproportionately applied.
Rules for gatekeepers
Although the Council’s agreement is tough, it does not necessarily put a stop to gatekeepers engaging with the FIDA framework.
The document states that “a data holder and data user, including entities that apply for authorisation…that is a gatekeeper or that is owned or controlled by a gatekeeper should be subject to a special assessment by the national competent authority of its registered office”, with input from EU-level authorities, such as the Commission.
“Gatekeepers should not engage in behaviour that would undermine the effectiveness of the prohibitions and obligations laid down in this Regulation,” the Council document says.
It continues that gatekeepers that wish to benefit from the FIDA opportunities will not be able to criss-cross data from customers that they “may already collect, store or otherwise possess for purposes outside” the framework.
The Council’s agreement marks a significant step forward, setting the stage for negotiations with the European Parliament to finalise the legislation.
Once an agreement is reached, the new rules will be formally adopted and published in the EU’s Official Journal before coming into effect.
An unpopular move
Brussels insiders are far from pleased with the work done on the regulation so far. One lobbyist recently told Vixio the Council should “just rip it up and start again”.
Another source suggested to Vixio that neither the industry nor regulators are giving enough thought to the impact of the regulation, and are making the same mistakes they made with the passage of the second Payment Services Directive (PSD2), but this time on a larger scale.
“With FIDA, there’s nothing preventing banks legally based elsewhere from offering more competitive mortgage rates,” the source said. “For example, a bank in Greece could offer cheaper mortgages to consumers in Belgium. Forward-thinking aggregators could compete with other banks.”
They suggested that “this is where banks need to start understanding fintechs better, as it’s no longer just about banks versus fintechs, but also banks versus other European banks”.
On the regulators, the source pointed out that the “Commission isn’t focusing on whether these initiatives add value. Mortgages and pensions could be far more disruptive, but after proposing FIDA, we haven't seen any other work from the Commission.”
“EU open banking has been a mess due to the lack of standards, and scaling across Europe has been bloody hard for fintechs,” the source warned. “FIDA has the potential to change this, as it's a regulation, not a directive. We need one, two or three clear schemes handling standards.”
“Otherwise, it’s just messy spaghetti.”
