Despite all the ideas and potential for innovation, regulation is necessary in order to eliminate the threats to unsuspecting consumers. Let’s look at the open banking regulation in the EU and around the world to find out how it is working for the benefit of the market!
Open Banking Regulation in the European Union
The European Union has a document that is considered the golden standard of open banking regulation. The document is PSD2 or the Revised/Second Payment Services Directive. Ever since its adoption in early 2018, the EU as a whole, as well as pretty much every member state of the block independently, has seen huge progress in the field of open banking.
The RTS, developed by the EBA and the ECB (European Banking Authority and Central Bank, respectively) are followed by each open banking tool, corporation and business, that’s involved.
This RTS outlines requirements for customer authentication and the general processing of data, according to existing security standards.
Open Banking Regulation in the United Kingdom
Apart from the EU, the UK is the only market with a stable and working foundation for an open banking ecosystem. In fact, the UK, if we only consider individual countries, is the undisputed global leader. It issues more licenses to open banking service providers in a year than 20 EU countries combined…
Due to these facts:
- The United Kingdom has been a member of the EU for so long
- There are lots of existing economic ties
- Close geographic proximity
- The foundation for the open banking ecosystem has been established while Brexit wasn’t still enforced
The United Kingdom has a regulatory model which is very similar to what you see in the European Union member states. All of the directives and the regulations are mainly just adapted versions of their EU counterparts (e.g. UK-RTS instead of just RTS). Just as in the European Union, in the United Kingdom, APIs of open banking have to meet the demands in terms of personal data security, reading and writing APIs, directories, DCR, and management information reporting, amongst others.
Open Banking Regulation in the Rest of the World
It’s hardly a surprise to know that open banking regulation in other parts of the world is either based on or at least somewhat similar to the EU and UK standards. Australia, Singapore, Mexico, and other countries have been trying to implement or at least measure the impact of this technology but have all been quite slower than the European block. In countries with no true regulatory model in place, we have the open market approach where developers and financing companies can do more to influence the state of the market.
Who is Responsible for These Regulations?
If you want to know who has the most influence over banking, you have to look at the legislators and the law makers. For now, the obvious frontrunners are the EU and the UK which we so often mention.
For the EU and the EEA, it all starts with the top banking authorities – ECB and EBA. They monitor the market and use recommendations from their own experts and parliament members. Then, the designated regulation implementation and monitoring duties are delegated to responsible local authorities.
In Germany that is the FFSA (Federal Financial Supervisory Authority), in Italy that’s the Bank of Italy, etc. They issue licenses and monitor the status of the market continuously.