The European financial sector is undergoing change
A fundamental structural shift is emerging in the European financial sector, one that goes far beyond individual regulatory measures. With the Financial Data Access (FIDA) regulatory framework, the EU is driving a key component of this change, but the real driving force is the overarching trend towards open finance.
The growing availability and accessibility of financial data are reshaping competition between banks, insurance companies and fintech firms, accelerating the roll-out of digital services and placing new demands on technological infrastructure.
FiDA as a regulatory framework for standardised data access
An expanded data pool forms the basis for a digital ecosystem that enables the secure, standardised exchange of financial data, thereby promoting innovative financial services and related offerings. It is crucial that control over the data always remains with the customers. In this context, FiDA serves as a regulatory instrument to implement this data control in a legally compliant, transparent and Europe-wide uniform manner, thereby building trust in data-driven business models.
At the heart of Open Finance lies the question of how financial data can be used, shared and controlled in future to create measurable added value for both customers and providers. Here, FiDA is intended to create the regulatory framework for standardised data access that goes significantly beyond the current Open Banking framework.
Whilst Open Banking primarily covers payment and account data, Open Finance describes a broader, cross-sector concept with a significantly wider scope. On the one hand, this relates to data and financial products – including information on accounts, loans, mortgages, savings, investments in financial instruments and selected insurance products. Supplemented by relevant data for creditworthiness assessment, this creates a consolidated view of the asset, financing and risk situation, which serves as the basis for well-founded analyses, personalised offers and automated services.
On the other hand, Open Finance encompasses a wide variety of financial institutions, including credit institutions, payment and e-money institutions, insurance companies, securities firms, asset management companies and pension funds. This cross-sector integration enables the seamless use of financial data and services throughout the entire financial value chain.
Rethinking access to financial data
Although FiDA is currently still undergoing trilogue negotiations in Europe, it is already clear that access to financial data will need to be rethought and restructured in the future. Regardless of the final regulatory framework, the influence of Open Finance is growing steadily.
Driven by
- changing customer expectations,
- technological innovations and
- new data-driven business models
numerous use cases are already emerging today that are becoming a reality even without formal FiDA requirements. FiDA will accelerate, harmonise and scale this transformation, but data-driven innovation in the financial market is already visible and is increasingly shaping the strategic direction of financial institutions, platform providers and technology partners.
Customer behaviour and market mechanisms are increasing the relevance of open finance
To understand the relevance of open finance, it is worth taking a look at customer behaviour and market mechanisms. Today’s customers expect digital services that are simple, fast and available at all times.
Traditional touchpoints such as branch-based banking or face-to-face advice continue to lose significance, whilst smartphones, tablets and computers have become the primary means of accessing financial services. These offer ease of use, speed, increasingly comprehensive services and constant availability.
The willingness to share personal financial data is steadily increasing, provided there is clear added value, such as transparent cost overviews, personalised analyses, automated decision support or tailored product recommendations.
Younger generations in particular are driving this change; for them, tangible benefits often take precedence over restrictive data privacy. Open Finance addresses these expectations through integrated, seamless and customer-oriented services that fit seamlessly into everyday digital life and create greater relevance in the context of use.
New business models through API-based data exchange
As a result of this changing customer behaviour, API- and data-driven business models are continuing to grow significantly in importance. In the context of open finance, APIs enable the secure, controlled exchange of financial data between banks, insurance companies and fintechs. Modular value chains are emerging in which individual services can be flexibly combined, exchanged and integrated into existing or new ecosystems.
Services can increasingly be used without resorting to the original provider’s interface. This decoupling of service and user interface increases freedom of choice for customers, but at the same time intensifies competition for direct customer contact.
Data-driven services, personalised offers and platform-based business models are creating many new opportunities, but at the same time this is also increasing the pressure on established institutions. Competition is increasingly shifting from individual products towards holistic user experiences and integrated service offerings.
As open finance becomes more widespread, the importance of the regulatory framework is also growing. Legislators worldwide are responding with clear guidelines on data protection, data security, technical standardisation and customer consent. Countries such as Brazil and India are considered pioneers and have already extended their open finance frameworks to insurance, pensions, investments and currency exchange.
With FiDA, the EU is joining this international trend. Standardised access creates a new quality and availability of data, enabling innovative services, more efficient processes and significantly greater personalisation. At the same time, the regulation helps to create a level playing field and sustainably strengthen customer confidence in data-driven financial services.
Open Finance: Already a success today
Concrete use cases from the market demonstrate that Open Finance is already working successfully today. One example is insurance optimisation based on Open Finance. Here, the customer’s life situation and insurance policies are analysed from transaction data. Using peer group comparisons and AI, recommendations for insurance cover appropriate to the current situation can then be generated and directly linked to suitable offers from the insurance company.
FiDA significantly expands this approach. For example, standardised access to financial data also enables the comparison of the components of existing insurance policies with the company’s own products, thereby allowing suggestions to be made for optimising existing insurance policies. These suggestions can be calculated with the utmost precision based on the extracted Open Finance data and tailored perfectly to the customer’s current situation.
Market segmentation is also undergoing a fundamental shift. Instead of purely demographic models, behaviour-based analyses are increasingly being used. With the help of machine learning algorithms or AI, patterns in income, expenditure or product usage can be identified, thereby enabling the derivation of highly precise customer segments.
Similarly, life events such as the arrival of a new family member, a career change or changes in income can be derived from transaction data and translated into context-based recommendations. FiDA data further refines segmentation possibilities, making tailored offers increasingly relevant. By addressing customers more precisely, customer satisfaction rises and long-term customer relationships are strengthened.
This development is accompanied by technological trends, particularly in the field of conversational banking. Artificial intelligence and access to additional data sources enable new dialogue-based services that go far beyond simple service or chatbots.
Personal financial assistants can analyse financial situations holistically, explain them and derive concrete recommendations for action. Even more complex queries such as: “Check whether my bank can offer me a better deal on my existing loan with third-party bank XY” are possible and can be answered automatically.
FiDA opens up new possibilities for Open Finance
Looking ahead, Open Finance is on the cusp of a new phase of development. FiDA opens up additional data domains and establishes uniform standards, thereby further improving data quality and availability. Transparent consent and explainable decisions are becoming key success factors. When customers understand how their data is being used and the specific benefits they derive from sharing it, their willingness to share data increases.
Open Finance thus enables a new level of financial data utilisation: in future, banks will be able to respond even more effectively to changes in their customers’ life situations using real-time events, or create hyper-personalised offers using a 360-degree view, whilst customers can make faster and more informed financial decisions thanks to intelligent co-pilots that increasingly take over optimisations in their day-to-day financial lives.
In this way, Open Finance is evolving from a mere exchange of data into an active companion – whilst simultaneously opening up new revenue opportunities for providers.
Take action now: secure competitive advantages through an early data and API strategy
FiDA will undoubtedly be a key milestone on the path to a digital, customer-centric open finance ecosystem – but it is not to be equated with open finance itself. Open finance is an overarching, long-term trend that is already well established in the market. Anyone waiting until FiDA is fully implemented before taking action is therefore wasting valuable time and innovation potential.
Clear success factors can be derived from changing customer requirements, the steadily growing number of API-based business models in the market, and the positive as well as negative experiences from the implementation of PSD2 regulations, such as:
- Consistent digitalisation of the customer interface with a focus on seamless and user-friendly processes.
- the development of an API-driven service ecosystem, and
- company-wide, strategically anchored use of data.
These topics are not merely a distant prospect of the FiDA regulation, but cornerstones of a functioning open finance approach.
Making use of the diverse opportunities arising from the introduction of the FiDA regulation will be a gradual and complex process that will accompany the industry for years to come.
Nevertheless, this transformation process should be actively initiated today, as numerous use cases can already be implemented and successfully established in the market based on the PSD2 interface.
With the help of the large volume of data made available by FiDA and the expected improvement in data quality, these can be specifically developed further, refined and enhanced with additional value. An incremental, use-case-driven strategy thus contributes to success in two ways: digital, more customer-oriented value-added services are developed step by step, and, furthermore, early market entry provides a strategic advantage over competitors.
In this way, relevant knowledge, technical infrastructure and organisational capabilities can be built up today, which will significantly facilitate the utilisation of the added value from the forthcoming introduction of FiDA whilst simultaneously creating sustainable competitive advantages.
