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11 Jun 2024 Article

What Is Financial Data Access (FIDA)? And What Does It Mean for Your Business?

What Is Financial Data Access (FIDA)? And What Does It Mean for Your Business?

In recent years, the payment services market has undergone significant change. One such change was the introduction of Financial Data Access (FIDA): the framework that enables individuals, institutions, and authorised entities to access, use, and share financial data.

FIDA is central to the broader financial ecosystem. With the primary objective to boost digital transformation in the financial sector, FIDA impacts and benefits both consumers, businesses, and financial institutions.

In this article, we’ll cover what FIDA is, its scope and purpose, and how it works to benefit businesses and consumers alike.

Topics we will discuss include:

  • What is Financial Data Access (FIDA)?
  • How FIDA relates to PSD2, PSD3, and PSR
  • The scope of FIDA
  • What is a Financial Information Services Provider (FISP)?
  • The benefits: Why FIDA was proposed
  • FIDA implementation: What’s next?
  • Faster, smarter, and more secure payments with Brite

What is Financial Data Access (FIDA)?

On 23 June 2023, the EU proposed a new Financial Data Access (FIDA) framework to expand the open banking data-sharing obligations. FIDA broadens the scope of customer data that can be shared and is expected to be adopted in the second quarter of 2025.

Under FIDA, the data-sharing obligations apply to nearly all financial services data. The proposal makes FIDA a cornerstone of the EU Digital Finance strategy that serves as the legislative foundation for the EU-wide implementation of open finance.

Open finance allows consumers and businesses to share their financial data with trusted third party providers (TPPs) in a secure and safe manner. This allows for more tailored, informed, and innovative financial management services for consumers and businesses alike.

How FIDA relates to PSD2, PSD3, and PSR

FIDA is closely related to the Payment Services Directives (PSD2 and the upcoming PSD3) and Payment Services Regulations (PSR) in the European Union.

The directives and regulations establish the legal framework that facilitates FIDA’s goals, which include improved consumer control over financial data, enhanced competition, and innovation in financial services.

The PSDs, PSR, and FIDA all include the concept of consent management. This is intended to offer two things:

  • Greater transparency for the customer, and
  • The option to easily withdraw access rights previously granted

In offering these benefits, all three regulations aim to further strengthen the end customer’s position as sovereign over the use of their financial data.

The scope of FIDA

FIDA will give consumers and small and medium-sized enterprises (SMEs) the right to authorise third parties (data users) to access and use their financial data. Unlike PSD2, FIDA covers almost all customer data held by financial institutions (data holders).

This includes information related to:

  • Loans
  • Mortgages
  • Savings
  • Pensions
  • Investments
  • Crypto assets
  • Non-life insurance products

Customer data that could directly increase the risk of financial exclusion – including data on sickness, health, and life insurance, or data related to assessments of consumers’ creditworthiness – is out of scope.

What is a Financial Information Services Provider (FISP)?

As defined in Article 4 of the FIDA proposal, Financial Information Services Providers (FISPs) are a newer, broader category of (soon-to-be) regulated third-party data holders. FISPs offer financial data aggregation, analysis, and related services to consumers, businesses, or financial institutions.

Like Account Information Services Providers (AISPs) and Payment Initiation Services Providers (PISPs) under PSD2, FISPs will be able to access a wider range of customer data related to financial products and services.

In the context of FIDA, FISPs enable and support a variety of areas, including:

  • Data access: FISPs are integral to the practical implementation of FIDA principles. By aggregating data from multiple sources, FISPs provide a comprehensive overview of an individual’s or entity’s financial situation, making financial data accessible and usable for consumers and businesses alike.
  • Consumer empowerment: FISPs enable consumers to gain greater control over and insight into their financial data. This aligns with FIDA’s goal of empowering consumers to make better-informed financial decisions.
  • Open banking: FISPs often leverage open banking APIs to access data from different financial institutions. Open banking regulations in Europe, e.g. PSD2, mandate that banks allow such access, provided consumers give their consent. In this way, FISPs operationalise data access and sharing principles central to FIDA.
  • Security and compliance: By adhering to strict security protocols and compliance with data protection regulations, FISPs support FIDA’s emphasis on data privacy and security.

You might also be interested in: ‘What is Open Finance and Why Does it Matter?

The benefits: Why FIDA was proposed

FIDA was proposed to address critical needs and opportunities in the financial ecosystem, benefiting consumers and businesses alike.

The primary reasons for the proposal of FIDA include the following:

  • Consumer empowerment: FIDA aims to shift the ownership of financial data to the consumers. This allows them to control who has access to their information and how it’s used, empowering them to make more informed financial decisions.
  • Enhancing financial innovation: One of the key motivations for FIDA is to foster a more competitive financial services market. Opening up data access to TPPs encourages innovation and the development of new financial products and services.
  • Improving financial inclusion: By leveraging data, financial institutions can offer tailored products to individuals who might not have had access to traditional financial services. It also allows for better credit scoring models, potentially enabling individuals with limited credit histories to access loans and other financial products.
  • Regulatory and market efficiency: By standardising data access protocols and integrating various financial systems, FIDA makes it possible to reduce costs and improve the speed of financial transactions. It also allows financial institutions to better monitor transactions, enhancing regulatory compliance and risk management.
  • Consumer protection and privacy: With a focus on enhancing data security and protecting customer rights and privacy, FIDA establishes clear guidelines and standards for data access and aims to ensure that sensitive financial information is handled securely.
  • Economic growth and stability: Easier access to financial data can help SMEs obtain financing and manage their finances more effectively. By promoting financial inclusion and innovation, FIDA also supports broader economic growth and stability. 

FIDA implementation: What’s next?

As we mentioned above, FIDA is currently in the draft stage and is expected to be adopted in the second quarter of 2025. The framework is subject to negotiations between the Commission, European Parliament, and Council of the EU.

Once the legislative process is complete and FIDA is adopted, the provisions will begin to apply 24 months later, with the exception of the obligations relating to data sharing schemes and the authorisation requirement for FISPs. These will apply starting 18 months after FIDA’s entry into force.

This leaves financial institutions and stakeholders with a two-year window to prepare for the new requirements under the FIDA regulation.

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