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June 02, 2021

Obstacles be gone: Open Banking and the possibility of a smooth customer journey for financial services in Europe

Martijn Bos

No one has ever said “I’d love to have a few more obstacles in my financial life.” The Netherlands has a history of constantly removing those obstacles, from inventing fractional ownership through the establishment of the Amsterdam Stock Exchange in 1609 to digital payments totalling over 126 billion euro in 2020. The Dutch are creative with their money- and the world is watching as consumers reap the benefits. The best financial services means having seamless access and control over your financial data. 

There are hundreds of businesses that have great solutions to enhance every day financial wellbeing and decision making - but they need access to their customer’s accounts and data. That’s where Plaid comes in - we work hard to help stakeholders, like public sector institutions, understand the value of a rich third-party provider (TPP) ecosystem and make sense of a thriving but fragmented landscape. The Second Payment Services Directive (PSD2), which mandates that banks allow consumers to permission the sharing of their data to  third-party providers (like Plaid), was meant to satisfy demand for an obstacle-free process , but it still isn’t always as smooth and easy as it should be.

For example, we sometimes run into bank-imposed obstacles, such as mandatory redirections or multiple SCAs, designed to dissuade people from using a TPP. These obstacles  interfere with consumer choice and limit the success of the European open banking ecosystem. The European Banking Authority (EBA) sees the harms caused by these challenges and has published opinions to try and remedy access issues, including asking local regulators to take action against banks that impose obstacles for TPPs that restrict open banking and consumer rights. Plaid agrees with the EBA, but we believe more should be done. 

We’ve set out two key points which we believe businesses need from the public sector to facilitate a frictionless experience for EU citizens:

1) Increased transparency for PSD2 metrics and API data points.

Information is power - and Plaid thinks you should know how your bank is performing on data access. We believe local regulators could take steps to promote greater transparency by publishing data points and metrics tracking the performance of PSD2 APIs. While  banks already publish limited performance metrics under the EBA’s Contingency Exemption Mechanism Guidelines, the EBA and local regulators should ask banks to also share consumer-focussed data points (for instance the time taken to complete a journey or points where consumers drop off) to drive better consumer outcomes. 

The sharing of data and metrics would enable TPPs to develop integrations with the best-performing APIs. Collecting these metrics and data points could also be useful in understanding consumer behaviours and preferences, which will be essential in building product specifications for open finance enabled use cases in the near future. 

2) A dedicated escalation process for TPPs to raise issues. 

When something breaks, consumers are frozen out of their data until it gets fixed. To combat this, local regulators should clearly define the escalation processes to be used when issues arise with APIs or dedicated interfaces.  The EBA’s direction is a helpful first step but the ecosystem needs further action to understand exactly which issues TPPs face to ensure the proper functioning of the market. 

We propose the implementation of local notification processes which would allow TPPs specifically to escalate unplanned unavailability events in a formal manner. Such processes should be captured within a robust framework which should clearly set out the supervisory and enforcement actions that could be taken against offending banks. We think this would help local regulators be able to more effectively monitor, supervise and enforce breaches of this nature; but it would also help improve trust in the open banking ecosystem. 

We think the two steps above would be a great addition to the work already being done in Member States around the EU - and are always willing to share our experiences and knowledge with the ecosystem. Get in touch with Martijn at mbos@plaid.com to discuss opportunities for collaboration and knowledge sharing!