Open Banking, Open Data and Open Finance: Lessons from the European Union

Abstract

Europe’s path to ‘open banking’, ‘open data’ and ‘open finance’ rests upon four apparently unrelated pillars: (1) the facilitation of open banking to enhance competition in banking and particularly payments; (2) strict data protection rules reflecting European cultural concerns about dominant actors in the data processing field; (3) extensive reporting requirements imposed after the Global Financial Crisis to control systemic risk and change financial sector behaviour; and (4) a legislative framework for digital identification imposed to further the European Single Market.

This chapter analyses these four pillars and suggests that together they will underpin the future of digital finance in Europe and that together they effectively establish the framework for not only ‘open banking’ and ‘open data’ but ‘open finance’. These European experiences provide profound insights for other societies facing choices as to the role of data in their future. In some, data will be controlled by a small number of massive firms and governments which use it for profit and suppression. In others, data will be under the control of individuals – democratized data – which should support a more open and innovative economy and society. In the evolution of these futures, legal and regulatory systems will play a key role.

Keywords: open banking, open finance, open data, data-sharing, APIs, PSD2, eIDAS, and GDPR