EU payment survey reveals gaps in readiness regulations | EY

From Open Banking to Open Finance

Despite the buzz around fintech and the 2018 EU Open Banking regulations, Europe’s financial services industry has yet to fully embrace the opportunities.

The number of Open Banking users in Europe is expected to reach 64 million in 2024, just a quarter of the banking population.

The EU has thus concluded that regulatory changes are needed to accelerate its 2020 digital finance strategy, which focused on four priorities:

1. Removing fragmentation in the Digital Single Market
2. Adapting the EU regulatory framework to facilitate digital innovation
3. Promoting data-driven finance
4. Enhancing the digital operational resilience of the financial system

Upcoming changes

The 2023 strategy update adds new emphasis on cybersecurity to boost customer trust and pan-European payment solutions (pdf), but most of the new regulations focus on making the existing digital finance infrastructure more competitive. It includes:

• Streamline the Single Euro Payments Area (SEPA) Instant Credit Transfer (SCT Inst) with round-the-clock, speedy transactions and allow customers to verify the name and the International Bank Account Number (IBAN) of payees
• Payment Services Directive 3 (PSD3) updates licensing and authorization for Payment and Electronic Money Institutions
• Payment Services Regulation (PSR) strengthens Open Banking rules by harmonizing implementation across the EU and boosting consumer rights and protection
• The Financial Data Access (FiDA) framework transforms Open Banking to Open Finance by extending data sharing to insurance, investments and other financial data
• A digital euro, still in development, to accelerate the shift to digital in day-to-day transactions

Increased competition

The starting point for the next phase of Europe’s digital revolution is the principle that customers, not banks, own their data. The new legislation therefore gives customers the right to access or share their data with any regulated entity, including third-party payments services companies, financial advisors, insurers and mortgage brokers.

Our survey revealed that 60% of respondents expect customers to seek greater data oversight as a result. We know that customers are willing to share their data in exchange for more sophisticated digital payments and a better user experience.

Rise in digital payments and better user experience will mark the most significant shifts in customer behavior