Message from the CEO, Nina Schindler
As announced in its 2020 Digital Finance Strategy for the EU, the European Commission’s ambition is to have an open finance framework in place by 2024. This is a topic of strategic importance to co-operative banks because, as consumer and retail banks, they traditionally hold a wealth of consumer data. And open finance is about the sharing of those data, which the clients of co-operative banks are sensitive about. Cooperative banks are acutely aware of not only their duty to protect customer funds, but also their data. The EACB has therefore taken a keen interest in the different workstreams that the European Commission is running to inform its future policy on open finance: It has encouraged the experts in its member organisations to apply for the Commission’s Financial Data Space Expert Group that is to advise on the preparation of legislative proposals and policy initiatives in the field of data sharing in the financial sector; it answered the Commission’s targeted consultation on open finance; and – as it considers that the Commission’s open finance policy should take into consideration the lessons learned from PSD2 - it responded to the Commission consultation on the review of PSD2. With the deadlines of the open finance consultation and the PSD2 consultation closing on 5 July, the EACB wanted to put the spotlight on this topic by way of a ‘Political Impulse!’ webinar on “Open Finance and How to Make it Sustainable” and this newsletter, which both benefitted from the cooperation with Marcel Haag, Director of the Horizontal Policies at the DG FISMA.
3 Questions to Marcel Haag, Director for horizontal policies, DG FISMA, European Commission
Marcel Haag is Director for horizontal policies at the European Commission’s Directorate-General for Financial Stability, Financial Services and Capital Markets Union. He has worked in different Commission services, including prior to his present assignment, as a Director for policy coordination at the Secretariat General of the Commission. Mr Haag is a lawyer and qualified as a judge in Germany.
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- Recently the Commission published a report on Open Finance of the Commission’s Expert Group on European Financial Data Space following a ceremony with Commissioner McGuinness. A concrete outcome of a bottom-up and cooperative approach. The Commission aims to have an open finance framework in place by 2024. What are the next steps the Commission will undertake?
The Expert Group on the European financial data space was set up by the Commission in June 2021 with a mandate to contribute advice and expertise to DG FISMA in establishing a European financial data space. The Group was asked in particular to examine matters related to open finance. The report prepared by the Group is a significant achievement with broad support from all the main stakeholder groups crucial to open finance – consumer protection organisations, incumbents (banks, insurance providers) and third-party providers (fintechs).
The report is a very welcome input as to the best way to achieve open finance. Open finance should ensure that more data becomes available for use within a secure data-sharing framework. It should give consumers meaningful control over their data, in line with data protection rules. It could promote competition and innovation. The report also highlights policy and technical areas that are important to the success of open finance. Standardisation is an important prerequisite to be able to share data. However, it is not sufficient. There also needs to be trust and confidence in data sharing.
Open finance will be embedded in the European Union’s overall data strategy. The different pieces of legislation the Commission has proposed will put the foundations in place to enable sharing and reuse of data based on trust, fairness, reciprocity and security. All these elements are closely aligned and contribute to a modern data economy that the EU sorely needs if it is to remain competitive. This is about offering our businesses and citizens the most effective products and services, about boosting economic growth and job creation.
To achieve this, we will have to overcome silos. Fragmentation is what we see today and what is holding us back. The Commission has made very clear that for instance the different data spaces being built at European level need to be connected and interoperable.
- Co-operative banks, as consumer and retail banks, traditionally hold a wealth of consumer data. Acutely aware of not only their duty to protect customer funds, but also their data, co-operative banks have been at the forefront of protecting customers’ data. Co-operative banks believe that the tension between data privacy and sharing of customers’ data is an important element to be considered. How does this sit in the Commission’s reflection?
Ensuring that consumers have meaningful control over their data must be at the heart of any open finance framework. Indeed, both in our broader public consultation and in the expert group, stakeholders agreed that a strong data protection framework is key to ensuring trust and confidence in data sharing in an open finance framework, and that more must be done to strengthen consumers’ and firms’ control of their data. With the GDPR we already have a strong framework for this in place, and we appreciate the sometimes challenging work of the banking sector to implement these rules. Going forward we will need to consider how this can be further supported. For example, consent management dashboards, made available for consumers to keep an overview over whom they have agreed to access which of their data for which purposes can be a useful tool to support this. But we also need to look at complexity and costs of such measures.
- When we talk about Open Finance, accessing and sharing of data are popping up in everyone’s mind as is the open banking experience (PSD2). All parties in the value chain should be allowed to derive benefits and build a business model so as to create more incentives to foster innovation. Does the Commission intend to do any further work on this with market participants?
We will certainly continue the work of our expert group which involves experts from all different parts of the financial sector.
We are also following with interest the work done, under the EPC auspices, on non-PSD2 API functionalities which could be offered to TPPs against a fee.
We hear the calls for a fair distribution of the costs for making data available. This is a tricky area which we will need to look at very carefully. I know that many banks resent the fact that in the context of PSD they built interfaces (so called API - Application Programming Interfaces) without the possibility to recoup part of this investment via fees charged to Third Party Providers (TPPs) when using these APIs. At the same time, an increasing number of banks also started to benefit themselves from accessing data to offer innovative products to their customers. We are examining this issue as part of our ongoing PSD2 review, and of the work on open finance.
Second Opinion from Gilles Saint-Romain, Head of Digital European Public Affairs, Groupe BPCE & Juliana Pichler, Senior Manager for Group Regulatory Affairs & Data Governance, Raiffeisen Bank International
Giles Saint-Romain is Head of Digital European Public Affairs at Groupe BPCE, the 2nd largest banking group in France. Gilles works daily to maintain an open and fruitful dialogue with the European Institutions, throughout the process of drafting, adopting, implementing and enforcing digital developments in EU financial legislation.
Juliana Pichler is Senior Regulatory Affairs & Data Governance Manager at Raiffeisen Bank International (RBI), a leading corporate and investment bank in Austria, with subsidiary banks and numerous other financial service providers in 13 CEE markets. In her current assignment, Juliana represents, leads and supports relevant lobbying initiatives, in particular with focus on Open Finance.
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Groupe BPCE and Raiffeisen Bank International are both European financial institutions based on the legal form of enterprise that is the co-operative, with a long-term vision of banking relationships and an approach that gives priority to human relations. We strongly believe that data-driven business decisions and models support us to best serve our customers while fulfilling our economic and societal commitments.
From our perspective, a European approach to data is essential to protecting consumers, ensuring competitiveness, avoiding fragmentation of national regulations, ensuring scale, and preventing unwanted effects that could benefit certain non-European players.
As per our contributions to the Report on Open Finance of the Commission’s Expert Group, which was recently published, we deem the following pillars of strategic importance for an Open Finance Framework:
Support of the voluntary data sharing model
We support the Commission’s general principle of facilitating data sharing. In our view, data sharing should be based on free choice, voluntary and on a contractual basis, in line with the European principles of a market economy. Such model would not only allow for innovation to be maximized but also for customers to be better protected thanks to clear contractually delineated responsibilities among the different parties in the data chain. Freedom of contract should be the cornerstone allowing for a level playing field for all economic actors that is fair for all participants.
Considerations for establishing a data sharing model based on a (partly mandatorily imposed) “right of access” in Open Finance, similarly to the PSD2, should not be recommended.
We believe that the ongoing PSD2 review will provide valuable learning effects on the first “right of access” to payment data introduced in the financial sector, to identify precisely what to replicate, what to avoid and what to do better in Open Finance.
Cross sectoral approach and level-playing field
Data sharing from other parties towards the financial sector should also be considered since innovation in finance also relies on non-financial data. Consumers will be offered the best innovative products and services by reusing and combining data across sectors.
In this context, it should not be underestimated that especially financial institutions already have to comply with requirements stemming from both sectoral and horizontal regulation, at EU and national level (e.g., GDPR, national banking secrecy laws, etc.). To preserve fair competition and the open market economy, we deem it of utmost importance to ensure data of personal and also non-personal nature (e.g., trade secrets or content protected by intellectual property rights) is safeguarded from unlawful access, to prevent, among others, data theft and industrial espionage.
Modalities of data sharing
To unleash the potential of such models, the use of all appropriate legal grounds under the GDPR should be promoted.
Further, we deem the right to compensation for data holders willing to share data, as already proposed by the Data Act, a key success criterion for a European financial data space with high-quality shared data. It will be crucial to ensure proper incentives for data holders to continue investing in high-quality data.
Conclusion
For Europe to develop leadership in this new data economy, innovation limiting factors should be avoided and the complexity of data analysis shouldn’t be increased. The incentive for the free development of new business opportunities based on promising data models should be preferred to a static approach of predefined use cases.
We therefore welcome the European Commission’s ambition to promote data-driven innovation through an Open Finance Framework, while recognising the leading role of financial institutions in the overall digital transformation of the economy.