What banks need to know to prepare for the impacts of the FiDA regulation

The EU’s proposed Financial Data Access (FiDA) framework promises transformative impacts for banks and other financial institutions.

The European Union’s proposed Financial Data Access (FiDA) framework is set to revolutionize the banking sector and broader financial services landscape. With potential approval in the coming months and implementation timelines of 18 to 42 months post-enactment, the urgency for banks to adapt is clear.

Once passed into law, FiDA will require financial intermediaries to share customers’ financial data – subject to customer consent – with scope to extend beyond traditional banking to include investment and insurance sectors. This shift is not just an extension of open banking; it represents a fundamental change in how financial data is accessed and used.

Taking the right steps to address the FiDA regulation

In light of the upcoming changes, it’s vital for management teams to move forward in the right way. Here are six key pieces of advice based on our work with companies across Europe and in other regions where Open Banking and Open Finance initiatives are well underway.

1 - Balance immediate compliance with longer-term priorities

As banks prepare for the extensive work required to comply with forthcoming EU regulatory changes including FiDA, there is a risk of focusing solely on compliance at the expense of strategic planning. It’s essential to consider how FiDA could affect digital distribution patterns – the digital methods and channels through which financial services are delivered to customers – through data aggregation and hyper-personalization. For example, banks should consider the potential for FiDA to foster online platforms that aggregate services from various providers, and consider whether to develop their own platforms. Banks may also need to evolve their services rapidly to retain customers.

2 - See the potential in other companies’ data

Although FiDA emphasizes safe and effective data sharing, and the corresponding challenges, banks should also explore the opportunities in using data from other companies. For example, banks can gain insights into customers’ mortgages and insurance purchased from other providers, allowing them to offer timely, competitive alternatives. Traditional banks must adopt this approach to compete with agile neobank and fintechs.

3 - Encourage a shared vision and collaboration across departments

The broad scope of FiDA will require management teams to promote cross-departmental collaboration, with a shared vision and understanding of the opportunities and challenges. Given the skepticism stemming from previous Open Banking regulations, fostering a unified approach across strategy, IT, compliance, risk, product development, innovation, digitization, marketing, sales and data management will be crucial for navigating the complexities ahead.

4 - Draw on external perspectives and learnings

As the effects of FiDA unfold, banks should look beyond Europe for lessons from other markets where Open Banking is thriving. In Brazil, for example, there are now more than 30 million consumers and small businesses consenting to data sharing since the introduction of Open Banking in 2021. Advisers and executives with international backgrounds can be especially valuable in this respect.

5 - Catalyze wider modernization efforts

Addressing FiDA and related EU regulations like PSD3, the PSR and the digital euro presents an opportunity for banks to undertake wider digital transformation. This includes resolving legacy issues and adapting to evolving customer expectations. Taking a more holistic approach to modernization can be more efficient and effective. Banks can focus on services that appeal to digital-native clients, encourage online service adoption, and enhance user experience (UX) and user interface (UI). They should also consider modernizing corporate banking services to meet future demands.

6 - Initiate discussions on Financial Data Sharing Schemes (FDSS)

The timeframe to define and join the FDSS in the current draft regulation is extremely short – just 18 months after the enactment of FiDA. Banks must establish their data-sharing strategies within FiDA’s guidelines and negotiate with other participants on technology infrastructure, APIs, remuneration, service levels, organization and governance. In addition, this will need codifying in FDSS rulebooks. Progress in this area is critical, as the defined scope and APIs will underpin the implementation of data-sharing initiatives in the banks’ systems.