Learning Objectives:

  • Understand the key regulatory frameworks governing open banking.

  • Explain the provisions of PSD2 and its implications for banks and fintechs.

  • Analyse the proposed Financial Data Access (FIDA) framework and its significance.

  • Compare open banking regulations across major jurisdictions.

2.1 Payment Services Directive 2 (PSD2)

The European University Institute course notes that “PSD2 has set the stage for Open Banking by outlining payment data-sharing guidelines” . The University of Sussex module covers PSD2 as a core regulatory framework .

Key Provisions of PSD2:

  • Strong Customer Authentication (SCA): Requires strong authentication for electronic payments.

  • Open Banking Mandates: The HKIB syllabus covers “Open Banking and Open API” as a core topic .

  • Third-Party Provider Access: The Udemy course notes that “open banking describes the use of application programming interfaces (APIs) to provide access to banking data and services” .

  • Consumer Protection: Enhanced consumer protection for electronic payments.

Implications of PSD2:

  • Data Sharing: Banks must provide access to account data to authorised third parties.

  • Competition: Increased competition from fintechs and non-bank payment providers.

  • Innovation: New opportunities for innovative financial services.

  • Security: Strong authentication requirements for electronic payments.

2.2 Financial Data Access (FIDA)

The European University Institute course covers the “Commission’s proposed framework for Financial Data Access” which “sets out rights and obligations to manage customer data sharing beyond payment accounts” .

Key Features of FIDA:

  • Beyond Payment Accounts: Extends data sharing beyond payment accounts to other financial sectors.

  • Unified Standards: The EUI course notes “the impending need to implement unified API standards and data-sharing protocols to unlock the full potential of embedded finance” .

  • Customer Protection: The EUI course covers “customer protection and regulation (PSD2, FIDA)” .

  • Cross-Sectoral Open Finance: The EUI course covers “The design of future Open Finance: Open Insurance, Open Banking and beyond – a cross sectoral overview” .

Significance of FIDA:

  • Expanded Scope: Moves from Open Banking to Open Finance.

  • Standardisation: The EUI course covers “API and data standardisation” as a key challenge .

  • Data Sharing: The EUI course covers “The role of digital identity in Open Finance” .

2.3 Global Regulatory Frameworks

The HKIB syllabus covers “Worldwide development – UK, EU, Singapore, Australia, Japan and China” as a core topic .

United Kingdom:

  • Open Banking Standard: Adopted across UK banks.

  • Competition and Markets Authority (CMA): Enforces open banking requirements.

Hong Kong:

  • HKMA Open API Framework: The HKIB syllabus covers “The HKMA’s four phases and their timelines” .

  • Four Phases: The HKIB syllabus covers “The HKMA’s four phases and their timelines” .

  • Common Baseline: The HKIB syllabus covers “The HKAB common baseline for TSPs + examples” .

Singapore, Australia, Japan, and China:

  • The HKIB syllabus covers “Worldwide development” in these jurisdictions .

  • Australia: Consumer Data Right (CDR).

  • Singapore: Monetary Authority of Singapore (MAS) open banking guidelines.

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