The Spanish Association of Fintech and Insurtech (AEFI) has prepared its first AEFI Voice report in which it analyzes what the openbanking concept means and what are the implications of the EU regulation PSD2, which will take effect officially in the month of September, for the financial sector in general, as well as for the entities and the clients themselves, who will be able to achieve greater legal security and see how the processes are streamlined.
1) What is open banking?
It refers to the opening of banking information to third parties (until now it was only available to credit institutions), through an open-source application programming interface (API, for its acronym in English). The ‘open banking’ is regulated by the European payment services directive (PSD2), whose transposition of the regulation, via Royal Decree, was published in November last year, but will not take effect until September 14, that will allow a period of transition to achieve the maximum legal security that favors its development. It is an adaptation of the market that credit institutions will have to face in order to generate competition, so that the client obtains better services in the field of payment methods.
2) What are the main advantages of ‘open banking’?
The PSD2, in charge of regulating the ‘open banking’, breaks down barriers since the owner of the financial information will now be the client, which will speed up the processes. In this new scenario, the entities will be faster when it comes to offering their products and will have to rely on start-ups with much more developed technological developments. This new regulatory environment will generate integration processes, with automated decision making to optimize the resources of companies. The PSD2 fixes its focus on the projection of the client, with the guarantee of the Bank of Spain, so that there are no problems in access or impersonations. The client knows under what criteria the information will leave and will be offered different alternatives so that the services are more personalized.
3) What are the main difficulties for its implementation?
The implementation of ‘open banking’ is generating some doubts and important questions to be resolved. The first of these are the conditions in which banks must give access to third-party accounts and what is the limit of information they must provide. In addition, the fact that external entities and providers deal with confidential personal and financial data entails the risk that someone may misuse the information. Given this, customers may show certain reluctance when sharing extremely personal and very sensitive information, such as their movements, the expenses of their different cards or the value of their assets. However, we must not forget that the final decision is always the client who, in any case, is obliged to share all this information. In addition, different issues regarding the implementation of enhanced authentication measures remain to be resolved.
4) How will it affect the daily work of traditional entities?
The main banking entities are already working with ‘open banking’, to the point that many of them have already launched their own API, to allow companies, star-tups and developers to launch new products and services by accessing and integrating banking data from customers, with prior authorization. Some entities will be favored by the implementation of ‘open banking’, since it will allow them to maintain agility to adapt to changes in the demand of their clients, as long as there is a change in banking models and in the mindset of managers. of these entities
Also published on Medium.