EU Data Strategy May Facilitate Open Finance in Europe

Since 2016, the European Commission has been designing a data strategy that aims to facilitate companies’ access to vast amounts of data they couldn’t access on their own, Nicolo Zingales, Professor of Information Law and Regulation, told PYMNTS about how the EU — with the EU Data Act and other legislative proposals — is facilitating this process. 

The EU Data Act and the European data strategy are not about mandating data access, but about stimulating sharing without forcing companies to do so, except in a few cases for public emergencies, explained Nicolo. 

This encouragement to share data includes many sectors, and one area where data sharing has already achieved the goal to increase competition and allow third parties to access data is in finance, through open banking. Data sharing through open banking in Europe is a legislative mandate rather than a voluntary exchange of information between the parties. However, Nicolo believes that the EU Data strategy now includes a European data space for finance. While it wasn’t initially conceived in the first place, after the open banking movement in the U.K. and the adoption of the European Payment Service Directive 2 (PSD2), now there is more political will to move towards an open finance market. 

The European Commission is planning to review the PSD2 by the end of the year, and the updated version could include more obligations to financial institutions and third-party providers to share data. One of these new obligations may come in the form of interoperability standards. 

“I think one of the lessons that we learned with the PSD2 is that requiring the sharing of information between banks without imposing an API — or at least defining common agreed standards for the API — creates problems. I can see that this new approach and the data strategy tries to update those problems by empowering the European commission with the advice of the European Data Innovation Board to develop interoperability standards in a concrete way,” said Nicolo in the interview. 

Interestingly, Nicolo believes that it would be easier to achieve the goal of the European data strategy in finance than in other sectors. “If we stay within the open finance, perhaps with a collaboration of the specific regulators and consultation with banks, like the way that it happened in the U.K., I believe it’ll be possible. In other sectors it might be more complex because there might be multidimensional types of transfers of information.” 

But the finance sector was not the main driver for the EU strategy — one of the most compelling reasons to introduce this plan was to reduce the power that Big Tech companies have over the data generated in Europe and to allow EU companies to access part of that data. The EU is planning to do this with several laws. One of them is the EU Data Act, which will allow companies to negotiate better data agreements with big tech companies, but another important law is the Digital Markets Act, which is already approved by the EU Parliament. It imposes some “data remedies” or obligations on Big Tech companies, denominated “gatekeepers.”

One of these remedies is data portability. The law, as Nicolo stated, requires gatekeepers to provide effective data portability, including real-time portability. It also obliges them to provide advertisers and publishers with data about their campaigns. “I think all these obligations try to create a level playing field by ensuring that the services can be provided equally in different environments.”

In any case, these changes won’t come overnight. The EC proposed the EU Data Act in February, and this is just the beginning of a legislative process that still needs approval by the European Parliament and the Council of Europe. Other legislative initiatives, like the updated PSD2, may come during this year to complement the European Data Strategy.