Rethinking the Right to Data Portability in the Transition from Open Banking to Open Finance in the EU

1.

INTRODUCTION

To provide some context for discussion, this chapter argues that the transition from Open Banking to Open Finance in Europe raises new complexities for the interpretation and exercise of the Right to Data Portability (RDP). This chapter also describes the research framework, consisting of the objective, questions, methodology, and structure.

1.1. Setting the stage

Data is now the most valuable asset in the financial industry. Avi Goldfarb and Catherine Tucker note that digital environments offer significant advantages for business growth, including reduced search costs for products and services, easy duplication and sharing of digital information at minimal expense, and simplified tracking of individual behavior¹.

In this context, private platform-based financial companies known as Fintechs have flourished, driven by substantial venture capital investments within a Silicon Valley startup business model focused on high-risk ventures and long-term profits². Initially, traditional banks adopted digital instant payments, yet later realized how redesigning from an impregnable data fortress into open-by-design platforms ³ allowed to create partnerships with Fintechs. As the old saying goes: if you can´t beat them, join them. This supported greater sharing and access to data, often referred to as Open Data Mobility, with the promise of exponential efficiency, innovation, and empowered collaboration in the economy⁴. For an overview of the potential gains from Open Data for finance by 2030 refer to Annex 1.

A data-driven financial industry, however, raises questions of power for the foreseeable future: one where data are controlled by a small number of giant firms and governments which use their control for-profit and suppression, to one where data are under the control of individuals – the ‘democratization’ of data – supporting a more open and innovative economy and society⁵. In response, the policy in the European Union (EU) has advocated for an open sharing of financial information between stakeholders chiefly to level the playing field between traditional banks and Fintechs⁶.

Access to data means access to the most fundamental input for creating products and services, thus it integrates new companies in the market with potentially better deals for consumers and more innovative solutions⁷. At the same time, public policy wanted to address the unintended risks brought by a digital ecosystem, such as privacy loss for customers and fraud⁸.

As a result, the European Parliament approved on 8 October 2015 the Revised Payment Services Directive (PSD2), followed by the European Council on 16 November of the same year⁹. The PSD2 came into force on January 13, 2016, and European Union (EU) Member States had until January 13, 2018 to transpose it in their national legislations, marking the EU as the first worldwide to make Open Banking