The Financial Data Access framework (Fida), which was published by the European Commission in June 2023, covers open finance. This builds on the concept of open banking, which refers to the sharing of payments data with third-party providers, but goes much further.
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“We think that it’s quite important that the institutions start looking at it, understanding and positioning themselves towards this regulation,” said Kautz. The ABBL and Deloitte Luxembourg last autumn carried out a survey to explore the extent to which financial institutions in the grand duchy understand the proposal, how they see opportunities, challenges and risks, and how they plan to prepare.
What’s in Fida?
With Fida, the aim is to “increase the trust that customers--you or us--might have in sharing our data with third parties,” explained 
One of the big impacts of Fida is the concept of dashboards that will have to be put in place
“This goes with a lot of obligations for banks, but also a lot of opportunities,” he said. And though it applies to the entire financial sector, the ABBL-Deloitte survey focuses on banks (as the ABBL is, after all, a banking association).
Permission dashboard, strategic opportunities
“One of the big impacts of Fida is the concept of dashboards that will have to be put in place. This will allow all of us to decide what we want to share with who,” Havard added.
This dashboard will be “very transparent for the consumer,” who needs to provide consent--or permission--regarding the data they wish to share (or not share) with third parties, noted Kautz. The content of the “permission dashboard” has yet to be clarified by the commission. It can be very “prescriptive,” she said, “which we would welcome in this case, because then it’s clear and the user also has the same experience wherever they go.” The objective is to increase consumers’ trust and to make sure they see the benefit of sharing data in a very secure way.
In the banking sector, Kautz continued, “some players may use to use this regulation to consolidate data from different actors; some may just choose to comply with the rules--that means, give the data if needed, but not to do any consolidation.” It’s really a “strategic choice” for financial institutions: they can either position themselves, take advantage of the opportunity, consolidate or aggregate different types of financial data, and develop other services; or they can simply comply with the rules and share the minimum amount of information as required by the regulation.
What’s interesting about Fida is that banks can also retrieve information about clients from other players, Havard pointed out. And using this information, they can also gain new insights, provide tailored services and create new sources of revenue.
Potential risks
On the other hand, there are risks related to this regulation. Financial information service providers (Fisps), for instance, would be aggregators of information, but they are not financial institutions, said Kautz, meaning “they don’t have all the regulatory burden of the banks.” They would, however, “be able to use all the financial data to develop new services.” Even though this is a European regulation, Chinese or American big tech companies could, for instance, use all this “rich data coming from the banking sector” for their own purposes.
If we become more reliant on digital channels, we also need to have more security related to that
There’s also the cybersecurity risk that needs to be addressed, added Havard. The Digital Operational Resilience Act (Dora), which comes fully into force in January 2025, aims to harmonise and reinforce the resilience of the information systems of financial sector entities and their information and communications technology (ICT) providers.
Dora is part of the European Commission data strategy package, and “the idea is if we become more reliant on digital channels, we also need to have more security related to that,” said Kautz.
Survey findings
So how do things look in Luxembourg?
What was observed during the ABBL-Deloitte survey is that although banks understand the concept of open finance, the details are still “blurry,” said Havard, making it key to raise awareness. The ABBL and Deloitte, for instance, organised an open finance conference on 16 January 2024 to discuss the new regulation.
Thanks to PSD2, the Payment Services Directive, banks already have some experience implementing APIs, noted Havard, which puts them one step ahead of other entities in the financial sector who are also in the scope of Fida. But more than half of the survey respondents (54%) answered “I don’t know/not assessed yet” when asked about their organisation’s position on the adoption of open/partner APIs.
Players need to act fast, said Havard. “The first one that will be able to be, let’s say, quite ‘voice-y’ on the market to explain what they’ve done, how they position themselves, will necessarily attract more attention for a customer that might be interested in this sharing of information.”
Biggest challenges to do with data management
The survey found that 16% of respondents expect challenges around data management and accessibility when it comes to implementing Fida and 16% foresee IT security challenges.
Added value through better use of internal data
But data can also represent an opportunity. About one-third (31%) of credit institutions polled as part of the survey said that the most interesting use case would be related to the better use of internal data due to the standardisation required to comply with Fida. About one in five (19%) saw opportunities in personal finance or wealth management tools.
Maintaining competitiveness via digital transformation
The regulation is pushing financial entities into digital entities into digital transformation, concluded Kautz. “Whenever you have something that’s mandatory, then you have to put it in place--and that’s the case with this regulation.” Fida will allow the development of tools that help banks and financial institutions become ready for the “new digital age.” It might be costly, but “it’s pushing banks to be at the level that they need to be to maintain competitiveness in the future.”
The ABBL’s working group aims to support members in open finance and provides a “platform for sharing experience on the standardisation, on the interoperability, on how we can actually reduce those implementation costs as a community,” she added. “We are working also on the advocacy points to make sure that Luxembourg is heard at the European level, if there are any specific concerns in our market, that we can also raise that to the commission, to the authorities.”
Fida will go into effect 18 months after the publication of the final text. Finalisation could take place in early 2025, with the 18 months starting from then. But one idea from the industry is to have a more gradual, or phased, implementation--by type of product or client, for instance. “Putting everything at the same time would be complicated,” said Kautz, and a staggered approach by product would be easier.
Find the ABBL-Deloitte open finance survey results here.
This article was published for the Delano Finance newsletter, the weekly source for financial news in Luxembourg. Subscribe using this link.
