At the beginning of February, the Financial Data Access Regulation (FiDA), the upcoming law that should make Open Finance possible, came under pressure. The European Commission is considering putting the project on the list of projects to be withdrawn, along with many more ongoing projects, in order to reduce the regulatory burden in Europe.
The possible cancellation of the FiDA regulation is a development that is understandable, but at the same time has far-reaching consequences for the financial sector, innovation and consumer interests in Europe. Although the regulation would have a profound impact on many financial parties, its failure to go ahead entails significant risks.
Understanding the complexity
FiDA was intended to deliver on the promise of Open Finance: a better functioning, more innovative and customer-friendly financial market in which consumers and businesses can securely share their financial data with various service providers. However, its implementation would require a major adjustment from banks, fintechs and other players in the sector. This requires major investments in technology, compliance and operational processes. It is therefore not surprising that doubts now arise about the feasibility and desirability of FiDA.
Delay undermines innovative power
At the same time, the possible discontinuation of FiDA means a serious setback for Europe's innovative strength. Open Finance can lead to better and cheaper financial services, more competition and a more dynamic ecosystem in which start-ups and incumbents can develop new solutions. However, without clear regulation, Europe risks falling behind regions such as the United States and Asia, where open data initiatives and collaboration between financial institutions and tech companies are already more advanced.
Customer interests and market forces under pressure
One of FiDA's core promises was that consumers would have more control over their financial data and therefore be offered better services and products. Without this regulation, banks and other financial institutions remain the custodians of customer data, which can limit access to innovative solutions. This can lead to less competition and ultimately higher costs and fewer choices for consumers.
Big Tech as a big winner?
Another major risk of discontinuing FiDA is that it further strengthens the position of large technology companies. While European financial institutions are subject to strict regulation around data use, big tech companies such as Google, Apple, Amazon and Meta already have access to vast amounts of user data, without having to comply with the same strict regulations. This could shift the balance of power in the digital economy even further in favor of big tech, to the detriment of European financial players and ultimately consumers.
Conclusion: Rethinking necessary
While the complexity and concerns surrounding the introduction of FiDA are understandable, the impact of its cancellation should not be underestimated. Restricting Open Finance threatens to slow down competition and innovation in Europe, strengthen the position of big tech and ultimately serve consumers less well. A reconsideration of the plans is therefore necessary, balancing both feasibility and the original objectives. This is the only way for Europe to continue to play a leading role in the digital financial world.
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