EU Regulation Update: FiDA Scrapped Amid Industry Pushback
Key Highlights
Original Aim: The regulation was designed to give consumers greater control over their financial data by requiring institutions to share information with both customers and competitors.
Industry Concerns: Financial services lobbyists and industry groups raised alarms over potential impacts on competitiveness and data protection, arguing that the regulation would divert resources from essential innovation.
Reason for Abandonment: According to the Commission, the proposal did not fit its evolving strategic priorities and risked introducing unwarranted complexity for financial actors.
Withdrawal Timeline: The FiDA regulation will be formally withdrawn within six months.
Regulatory Reversal: FiDA Regulation Withdrawn
In a major policy reversal, the European Commission has decided to abandon its proposed Financial Data Access (FiDA) regulation, originally set forth in June 2023. This decision comes on the heels of intense criticism from the financial services industry, which warned that FiDA would impose excessive burdens and complexity on market participants. Traditional financial institutions also feared that the proposed bill would unduly favour the tech sector by granting it effortless access to consumers' investment and savings data. This, they argued, would enable tech companies to offer highly personalized products, leaving established banks struggling to compete. The Commission stated that the measure was “not aligned with the Commission’s current objectives” and would significantly disrupt financial operations, prompting its withdrawal within the next six months.
What Was FiDA All About?
FiDA was envisioned as a key pillar in the EU’s broader strategy to create an open finance ecosystem. Its main objective was to facilitate secure data sharing among banks, insurers, investment firms, and other financial institutions. By requiring that these institutions share customer data only with explicit consent, the regulation sought to empower consumers, drive innovation in data-driven financial products, and ultimately foster a more competitive financial landscape across the EU.
Industry Reaction & Broader Implications
The decision to scrap FiDA represents a significant shift in the EU’s approach to financial data sharing. Industry leaders have welcomed the move as it allows for a recalibrated strategy that balances data accessibility with the need for robust privacy and operational safeguards. However, the debate is far from over. Discussions continue around related regulations such as PSD2—and its forthcoming successor PSD3—as well as other digital finance initiatives aimed at modernizing the financial services sector.
This regulatory pivot could have far-reaching effects:
Consumer Empowerment: While FiDA’s abandonment may delay immediate gains in consumer data control, it opens the door for more measured, industry-informed reforms in the future.
Innovation & Product Development: Financial institutions now have an opportunity to refine their approaches to open banking without the additional compliance costs that FiDA would have imposed.
Market Competition: With fewer regulatory burdens, established banks and fintech newcomers alike can focus on developing competitive, data-driven products that meet evolving customer needs.
Looking Ahead
As the European Commission reassesses its regulatory framework for digital finance, stakeholders from across the industry are calling for a balanced approach that avoids over-regulation while still promoting innovation and protecting consumer data. The ongoing debates over PSD2/PSD3 and open finance underscore the need for clear, proportionate regulation that supports a vibrant financial ecosystem without stifling competitiveness.
Sources: Politico.eu, Stripe.com, thepaypers.com, lighthouseeurope.com
