09.08.2024

FIDA "Financial Data Access"

FIDA: Comprehensive regulation for end customer data in the financial sector is imminent!

The financial sector can very likely look forward to another significant change: With the proposal of June 28, 2023 for a new EU regulation "Financial Data Access" (FIDA), the European Union wants to set a new standard in the "Open Finance" legal framework (link to proposal for EU regulation). The market expects the EU to adopt the new regulation between the end of 2024 and the beginning of 2025.

We recommend that affected customers consider the impact on their own business model now so as not to lose touch with technology-savvy companies in the financial sector.

FIDA as extension of PSD2

FIDA is to build directly on the Payment Services Directive2 (PSD2) issued for banks in 2018. PSD2 opened doors for new market participants (especially FinTechs) six years ago with the introduction of open interfaces (APIs) for payment transactions and broke up the payment market, which had previously been heavily dominated by banks.

Building on the success of the PSD2 open banking approach, the EU now wants to create a uniform legal framework for open finance (as an extension of open banking) in the current proposal.

In essence, not only payment transaction data, but also other financial data is to be regulated following user consent. In addition, the legal framework extends beyond banks to other authorized financial institutions and registered third-party providers. The proposal is in line with the GDPR's principles for the protection of personal data in order to achieve the EU's core objective of giving customers as much control as possible over their own data.

Scope and roles in FIDA

 

As described above, the EU wants to use FIDA to extend the scope of application from banks to other market participants. In principle, the EU distinguishes between data holders (financial companies that hold end customer data) and data users (companies that lawfully process customer data with the permission of a customer). All financial institutions and authorized third parties (so-called FISPs, Financial Information Service Providers) can in principle participate in FIDA and be both data holders and data users. However, in order for a FISP to participate in FIDA, it must be authorized by the competent national authorities.

The opportunities for market participants largely result from the deepening of customer relationships and the creation of new products. Now that the banks have already gained experience with PSD2, the greatest potential lies with these institutions:

 

  • Credit institutions
  • Securities service providers
  • Insurance companies and reinsurers
  • Rating agencies
  • Crowdfunding service providers
  • Crypto service providers
  • Pension funds
  • Fund companies
  • and more

FIDA: Requirements, rights and obligations for data access

 

In principle, data owners are obliged to make end customer data available to the corresponding data users at the customer's request. In return, data users are obliged to use the customer data exclusively for the specified purpose.

In principle, data should be passed on via standardized interfaces (APIs) analogous to PSD2 in order to ensure improved cooperation in the industry. These interfaces are to be regulated in a binding manner for all market participants and applications within corresponding committees. Data owners can demand an appropriate fee from data users to compensate for the costs of setting up such interfaces.

FIDA takes into account both personal and non-personal data that is collected and processed as part of the normal business activities of financial institutions. Examples in the banking sector include mortgage loan agreements and crypto-assets. For insurance companies, products in the area of insurance-based investment products (IBIP), pensions and property and casualty insurance are particularly affected. Data from health and life insurance policies and biometric products are excluded from FIDA.

A key element of FIDA from the end customer's perspective will be the mandatory introduction of a dashboard. This is to be provided by the data owner. The dashboard allows customers to obtain transparency about their data processing at any time and to control authorizations.

Grafik mit Abbildung eines Schemas des Ablaufs von Daten-Sharing

FIDA leads to more opportunities than risks!

The ability to access data from other market participants means that many new and personalized products can be implemented for end customers using partnership models. This offers innovative companies potential for growing market shares. At the same time, competitive pressure is increasing, as companies' own data is also potentially accessible to other market participants. For all companies in the market, there are costs for the preparation and technical implementation of the required transparency obligations and APIs.

The German banking industry (DK) supports the EU's proposal to take advantage of the opportunities offered by the data economy. It calls for the secure transfer of data, the consideration of customer and market needs and the creation of fair competition as a central focus. In view of the comprehensive measures to be taken and the planned time horizon, the current proposal is too ambitious. A step-by-step development based on continuous evaluations and adjustments is proposed. (HERE)

The German Insurance Association (GDV) emphasizes the advantages of a dashboard for regulated data release for customers and companies. Customers would have a good overview of their financial data and companies could use it to offer high-quality services. However, the association warns of the risk of losing business secrets due to the broad definition of the data concerned. GDV is particularly critical of the distinction between internal data and customer data and calls for a revision of the approach. The association also emphasizes the need for an appropriate compensation scheme for IT conversion costs and advises a gradual introduction in order to avoid risks and high costs. You can find the GDV statement HERE.

 Turn the regulatory obligation into your competitive advantage now with Intero Consulting 

 

It is currently unclear exactly when FIDA will be adopted. Regardless of the specific date and whether FIDA will be introduced gradually or directly, it should now be a priority for every financial institution to prepare for the far-reaching regulatory change. In order to meet the regulatory obligation, it is necessary, among other things, to build up expertise in the area of standardized interfaces (APIs) and the mandatory dashboard. In addition, data must be available in a recognized standard format in real time.

We recommend using FIDA as an opportunity to set the course for decisive advantages for your own business at an early stage. Thanks to our many years of industry knowledge, our experts can support you in this. In collaboration between our industry and GRC experts, we have created the following 4-step model for FIDA readiness for you:

  1. Assessing the impact of FIDA on your business model:
    In the first step, we examine how FIDA affects your business model. We work with you to gain a basic understanding of the regulatory requirements and assess the economic consequences.
  2. Expansion of the data strategy:
    The Intero-Consulting team works closely with you to develop and expand a data strategy that is optimally adapted to your business model. This forms the core element of a successful adaptation to FIDA.
  3. Defining benchmarks for success:
    Together, we define benchmarks for success that can be used to reliably measure and evaluate the measures introduced.
  4. Building partnerships - creating synergies:
    We work together to develop a data ecosystem through partnerships. This enables seamless implementation of the strategy in products and services.

We keep an eye on the topic of FIDA for you. We will keep you up to date on further developments in our blog.

Your FIDA experts

[Translate to English:]

Dr. Johannes Engel

Partner
Dies ist ein Porträtfoto von Sarina Wittchen.

Sarina Wittchen

Partner
Dies ist ein Porträtfoto von Lukas Meißner.

Lukas Meißner

Senior Manager

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