Evaluating the Regulatory Approach to Open Banking in Europe: An Empirical Study

Abstract

This paper assesses the impact of the regulatory approach to open banking in Europe. The evaluation is based on a review of the revised Payment Services Directive (PSD2), Regulatory Technical Standards (RTS) and the studies of experts from 30 countries as part of the PayTechImpact.EU project. The study aims to examine the effects of the introduction of the PSD2 regulation in the EU. The results of the study reveal that PSD2 is an example of an effective lawmaking process. It focuses on stimulating innovation and creating new value for customers, while concurrently developing the competitiveness of the payment services market. EU regulation has proved to be an effective instrument for creating an open technical infrastructure in the payment services market. Infrastructure development within the European Community regulatory framework has lowered the entry barrier for payment services. Open banking has strengthened consumer security and resulted in fraud reduction. However, the high financial costs incurred in implementing PSD2 has limited its positive impact. The most important issues identified include inconsistent regulatory requirements for non-bank financial companies, the imperfect development of API-based open banking infrastructure, and problems with lost transactions. An analysis of the PSD3, PSR1, and FIDA regulatory proposals indicates that they adequately address the identified outcomes of PSD2 and expectations of financial sector stakeholders.

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