The rise of Open Finance marks a significant new chapter in European financial regulation. With the introduction of the Financial Data Access regulation (FiDA), an effort is being made to make data exchange in the financial sector broadly accessible, standardized, and regulated. However, this openness brings not only promising opportunities but also numerous risks and concerns. In this article, we dive into the power dynamics surrounding FiDA, in which policymakers, countries, and stakeholders seek to strike a balance between innovation and protection.
The legislative process and political manoeuvring
The FiDA proposal from the European Commission is now on the table at the European Parliament and the Council of Ministers. In this tension-filled arena between European institutions, intense lobbying is currently underway. The various member states have divergent interests: countries like Germany emphasize the importance of innovation and technical standardization, while countries like France are distinctly critical. Meanwhile, the Commission is attempting to steer the conversation through so-called “non-papers,” which include alternative formulations and exceptions in an effort to reach political consensus. A new round of trilogues — negotiations between the Commission, Parliament, and Council — is expected in June, during which the parties will aim to finalize the legislative text.
Opportunities of Open Finance
FiDA is intended to lay the foundation for a European open finance infrastructure in which consumers can share their financial data with other parties, provided they give their consent. The benefits are clear: consumers gain more control over their finances, better and faster services, access to innovative tools, or personalized financial advice. Fintechs gain the ability to offer new products — with user permission — that were previously the domain of traditional institutions. Increased competition encourages innovation, transparency, and a customer-focused financial sector.
FiDA is intended to lay the foundation for a European open finance infrastructure in which consumers can share their financial data with other parties, provided they give their consent.
The flip side: risks and vulnerabilities
Still, there are concerns. One significant risk is the regulatory burden that FiDA may impose. Many financial institutions will need to revise their processes, upgrade their IT infrastructure, and develop new services. This could become a disproportionate burden. Especially banks, insurers, or pension funds with outdated systems risk falling behind. The mandatory opening of data means they must be able to adapt quickly and flexibly — something that is not always feasible within legacy systems. The other obvious risk is that competition may lead to shifts in the market. That’s good for the customer, but not all established players with influence in parliament will be pleased. Protectionism is a significant factor here as well.
Open, but not without limits
The core question underlying FiDA is: how open is too open? The concept of openness is appealing but also raises fundamental objections. Mandated data sharing creates opportunities for misuse — or, as critics call it, “creative use” — of information. A fully open system could be exploited for purposes that are societally undesirable.
The core question underlying FiDA is: how open is too open?
The first boundary to openness is the GDPR. User consent is a requirement, but not a carte blanche. There are concerns that personal data might be used in ways that violate the spirit of privacy legislation. For example, the ability to indirectly reconstruct someone's profile — known as “reverse engineering” — through data patterns. Such possibilities, critics argue, must be legally restricted.
A second limit is commercially sensitive information. FiDA must not result in a company’s unique approach — their intellectual property — becoming public via shared data. There’s a real risk that competitors could indirectly gain insight into another party’s strategy, target group, or methods through data analysis. Especially in the competitive fintech ecosystem, this could lead to strategic misuse. Some member states are therefore advocating for provisions that explicitly prohibit the use of data for such purposes.
Risk segmentation: a new inequality?
A third major concern raised by the French delegation is that an open system could erode the principle of risk mutualization by enabling far-reaching risk segmentation. In theory, companies could soon use financial data to determine customers’ risk profiles with great precision. That sounds like an improvement, but it has a dark side. People with a higher risk profile — due to their place of residence, profession, or historical behaviour — could charged higher costs or even excluded. This increases social inequality, a concern that is particularly prominent in France.
Moreover, some risks are beyond consumers’ control — think of natural disasters, pandemics, or other external shocks. Open finance must not lead to people being financially penalized for such events or the risk of such events. The French delegation argues that these types of events should fall outside the scope of FiDA to prevent climate or geographic risks from causing financial exclusion.
Protection against tech giants
Another sensitive issue involves the role of large tech platforms — the so-called gatekeepers. These platforms, like Google, Amazon, or Apple, possess vast amounts of user data and digital infrastructure. To prevent them from dominating the FiDA ecosystem, the draft law includes explicit restrictions. If a company is designated as a gatekeeper under the Digital Markets Act (DMA), it cannot obtain a FISP license — a permit required to operate in open finance.
If a company is designated as a gatekeeper under the Digital Markets Act (DMA), it cannot obtain a FISP license — a permit required to operate in open finance.
There are also additional safeguards: subsidiaries of gatekeepers are also excluded, and gatekeepers are not allowed to process data obtained under FiDA. These measures aim to rein in Big Tech’s power and ensure a level playing field for European financial institutions and fintechs.
Conclusion: between ideal and reality
FiDA embodies the promise of a more open, accessible, and innovative financial market in Europe. The law could give consumers greater control over their data and stimulate competition. But at the same time, FiDA is also a litmus test: how do we organize openness without being naïve? How do we create space for innovation without losing sight of fundamental rights or economic interests?
The legislative process is still ongoing. The trilogues in June will be crucial for shaping the final form of FiDA. The way boundaries are drawn — legally, technically, and ethically — will determine whether FiDA is a success. An open system is promising, but only if we take its vulnerabilities as seriously as its opportunities.
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