Data, Innovation and Transatlantic Competition in Finance: The Case of the Access to Account Rule

In our paper ‘Data, Innovation and Transatlantic Competition in Finance: The Case of the Access to Account Rule’, we focus on the EU regulatory effort, enshrined in Directive 2366/2015 on payment services in the internal market (PSD2), to enact a sector-specific data portability regime (the access to account rule) expressly aimed at fostering competition within FinTech-enabled retail payment markets. We point out that standardization would be called to play a crucial role with regard to the implementation process and the overall effectiveness of this new pro-competitive mechanism. Eventually, we investigate the tasks of competition law enforcement in such a new scenario.

Financial services are awash in data and FinTech innovation may impact on all kinds of financial services and products. Suffice it to say that the use of big data technologies may serve to offer new tailored products and services integrated with the traditional ones (ranging from comparison tools to personal budgeting and risk control activities).

Pursuant to the access to account rule introduced by PSD2, account servicing payment service providers, such as banks, shall allow third parties to obtain real-time data relating to customers’ accounts as well as execute payment orders initiated through their interfaces. This mechanism is conditioned on customer’s previous consent and the online accessibility of the account. Accordingly, banks are under an obligation to grant such access on a non-discriminatory basis to providers of both payment initiation services (PISs) and account information services (AISs). Any bank shall treat and execute all the payment orders transmitted via a third-party’s interface as if they were sent directly by the customer through the banking infrastructure, without any discrimination towards PISs and AISs. The measure is supposed to benefit customer welfare by giving them greater bargaining power and control over their data. Notably, by introducing a sector-specific data portability rule (the access to account rule), the PSD2 marked a crucial step towards the unbundling of retail payment markets to authorized newcomers, which from now on will have the right to request account information without any previous agreements with banks.

The access to account rule aims to represent the gateway to strengthen competition in the banking and financial services industry and the path towards an Open Banking environment. What is meant by this expression is an evolution of banking that, through the use of open application programming interfaces (APIs), enables consumers to share their data and account functionality for access and use by third parties. We point out that the implementation process of such mechanism is going to be crucial in determining the success or failure of the regulatory intervention. Even though policy makers took a clear stance in favour of standardization, there is no agreement among undertakings whether to adopt standardized, open APIs or let incumbents compete and autonomously develop their own interface to share financial data. 

Interoperability is a priority for the FinTech market and standardization initiatives aimed at defining shared, open APIs are encouraged in Europe and other countries (eg Australia, Canada, Mexico, Japan, Singapore). For its part, the UK’s Consumer and Markets Authority took the lead in the transition towards Open Banking by enacting an array of additional measures aimed at going further than the PSD2 goals and mandating the development of a single, open standardized API for the whole industry.

Further, we stress that, from a competition policy angle this legislative move makes perfect sense as it provides for a general duty on incumbents to grant access, on a non-discriminatory basis, in favour of new entrants which would otherwise be precluded from providing their services. The regulatory intervention enacted by the EU proved necessary as the need to guarantee safe and stable access to a newly arising vertical integrated multitude of players cannot be achieved by means of the existing antitrust toolbox. 

Finally, it cannot be denied that a major role in determining the pro-competitive goal of the regulatory intervention at stake will be played by consumer reaction and feedback. While there are few doubts about the potential disruptive impact Open Banking could have on incumbents’ market power, the response from the demand side remains to be seen.

Oscar Borgogno is a PhD Candidate, Law Department, University of Turin and a MSc in Law and Finance Candidate, University of Oxford. 

Giuseppe Colangelo is Jean Monnet Chair in European Innovation Policyand Associate Professor of Law and Economics, University of Basilicata.