A note on regulation

MARIA PALMIERI, DIRECTOR OF PUBLIC POLICY, YAPILY

Navigating a fragmented landscape

There’s no doubt that PSD2 has fostered innovation across the European payments landscape, encouraging more competition and the development of new solutions for consumers and businesses.

However, localised payment systems and fragmented regulatory approaches mean diff erent EU member states are implementing open banking at diff erent speeds. As a result, market readiness varies signifi cantly across Europe, creating headaches for fi nancial institutions, payment service providers, and businesses from SMEs to enterprises.

Recently, the EU Commission has been taking steps in the right direction, launching the EU Digital Finance Platform to feed into its upcoming proposal on open fi nance. Last year, it introduced the eIDAS framework to ensure that data sharing between businesses is safer, faster, and more effi cient. And in May 2022, the Commission announced a series of consultations on the next evolution of PSD2, including an ambitious new framework for open fi nance.

Yapily 2022

The journey from PSD2 towards PSD3

As the EU takes stock of progress over the last four years, it is now contemplating what more can be done to ensure that consumers are given better choices as open banking continues to evolve.

PSD2 has very much laid the groundwork for open banking to thrive, particularly increasing competition in retail payments. Now, the European Commission (EC) has the opportunity to go one step further and resolve some of the systemic issues that have surfaced as the open banking ecosystem continues to grow at pace.

It’s encouraging to see the European Banking Authority’s (EBA) recommendations on the PSD2 review taking challenges that many in the open banking community have faced into consideration. This includes transparency requirements from Account Servicing Payment Service Providers (ASPSPs) - traditionally banks or similar institutions; acknowledgement of the barriers to third party providers from delayed implementation; as well as some

clear proposals for a future open finance framework.

Adoption is skyrocketing across much of Europe, but there’s so much more we can do. As we embark on the journey from open banking towards open finance, a regulatory framework for the future will need to unite the fragmented approaches currently adopted by different EU member states, recast the net for those captured by antimoney laundering requirements, and take on a broader scope to include more than just payments accounts. We look forward to working with the EBA and other European leaders on what comes next.

Yapily 2022

The European Commission has the opportunity to go one step further and resolve some of the systemic issues that have surfaced as the Open Banking ecosystem continues to grow at pace,” MARIA PALMIERI, DIRECTOR OF PUBLIC POLICY, YAPILY

UK regulators under pressure to maintain the top spot

It is unsurprising that the UK has again topped our European open banking league table, its success largely driven by the appointment of the open banking Implementation Entity (OBIE), an organisation dedicated to driving open banking innovation and adoption. Together with the UK Competition and Markets Authority (CMA), the UK’s regulatory-led approach has brought banks and third party providers together in order to maximise market participation and increase productivity across the sector.

And yet, many questions still remain around the future of open banking in the UK. With the current mesh of regulators under the Joint Regulatory Oversight Committee (JROC), it is almost impossible for fintechs, banks, and TPPs to plan for the future. The UK open banking ecosystem would benefit from the creation of a formal open finance framework and further guidance on the future role of the OBIE,

particularly around monitoring and enforcement.

In order to stay competitive and maintain its lead, UK regulators must act quickly and decisively by adopting the necessary governance model needed to encourage further growth and innovation. Further regulatory delays are in danger of stifling innovation across the UK fintech sector. Recent clarity from the CMA on Variable Recurring Payments (VRP) for sweeping is a step in the right direction, but only when policy mandates move beyond me-to-me to me-to-business payments will VRP become a true game-changer for e-commerce. As more premium APIs like VRP become available, more innovative use cases for open banking will be realised. But before we get there, more collaboration between policymakers, banks, and TPPs is needed to ensure the transition from open banking to open finance becomes a reality.

Yapily 2022

In order to stay competitive and maintain its lead, UK regulators must act quickly and decisively by adopting the necessary governance model needed to encourage further growth and innovation.”