Inconsistent EU regulation hindering open banking progress
Regulatory hurdles and data discrepancies are hindering the progress of open banking across Europe, ConnectPay has warned.
The fintech platform pointed out that EU regulations such as the Payment Services Directive 2 (PSD2) can be interpreted in different ways by different jurisdictions, which can make it difficult to roll-out open banking products across multiple markets. Similarly, licensing issues with payment processing software can create unnecessary hurdles.
“Each state interprets PSD2 regulatory policies differently, resulting in subtle nuances that need to be taken into account on a country-by-country basis, which leads to a plethora of differences and effectively limits smooth rollout,” said Marius Galdikas, chief executive of ConnectPay.
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“Also, our merchant API is powered by payment initiation and account information services (PIS/AIS). In many cases, PIS and AIS cannot work without the other, however, they are regarded as two different licenses with separate regulatory nuances, adding to the challenges.
“It is inconsistencies like such and the absence of a clear, unified approach towards what payer data hinders further progress and the presence of a truly open financial service ecosystem.”
Galdikas called for a unified system for open banking services across Europe, which would include a new registry of all licensed providers, and sector-wide regulations.
“What could help enable open banking is a unified payment provider list in the European Union with real regulatory authority, as the present register, set up by European Banking Authority is based only on the information provided by EEA member states, meaning that unlike national registries under the PSD2, it has no legal significance,” Galdikas stated.
“In addition, specifying the regulatory requirement scope would aid tremendously in addressing the problems at hand.”
The UK-based Open Banking Implementation Entity recently revealed that between 7.5 and 8.5 per cent of digitally-enabled consumers are now using at least one open banking service. This is up from 5.5 per cent of consumers who were actively using open banking by December 2020.
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