Courtesy of Oscar Borgogno* and Giuseppe Colangelo**
In our paper ‘Data, Innovation and Transatlantic Competition in Finance: The Case of the Access to Account Rule’, we focus on the EU regulatory effort, enshrined in the Directive 2366/2015 on payment services in the internal market (PSD2), to enact a sector-specific portability regime (the access to account rule) expressly aimed at fostering competition within FinTech-enabled retail payment markets. We point out that standardization will play a crucial role concerning the implementation process and the overall effectiveness of this new pro-competitive mechanism. Eventually, we investigate the role that EU competition law enforcement will play in such a new scenario.
Financial services are awash in data, and with new innovations this data may be harnessed to offer new tailored products and services integrated with traditional ones (ranging from comparison tools to personal budgeting and risk control activities). Pursuant to the access to account rule introduced by PSD2, account servicing payment service providers, such as banks, shall allow third parties to obtain real-time data relating to customers’ accounts as well as provide access to such accounts by executing payment orders initiated through their interfaces, on condition that the customer give explicit consent and that the account is accessible online. Furthermore, banks are under obligation to grant such access on a non-discriminatory basis to providers of payment initiation services (PISs) and account information services (AISs). PISs are services based on orders to initiate a payment, at the user’s request, directed to a bank. These services contribute to opening up the retail payment market by lowering transaction prices and facilitating online payments, both for businesses and consumers. This development opens the door to widespread use of mobile and internet payments.
More specifically, any bank shall treat and execute all the payment orders transmitted via a third-party’s interface as if they were sent directly by the customer through the banking infrastructure, without any discrimination in terms of charges, timing and priority. The measure is designed to benefit customer welfare by giving them greater bargaining power and control over their data. Notably, by introducing a sector-specific portability rule (the access to account rule), PSD2 marked a crucial step towards the unbundling of retail payment markets to authorized newcomers, which from now on will have the right to request account information without any previous agreements with banks.
The access to account (XS2A) rule aims to strengthen competition in the banking and financial services industry and forge a path towards an Open Banking environment where application programming interfaces (APIs), enable consumers to share their data and account functionality with third parties. However, the implementation process is crucial in determining the success or failure of such regulatory intervention. Even though policymakers took a clear stance in favor of standardization, there is no agreement on whether to adopt standardized, open APIs, or let incumbents compete and autonomously develop their own interface to share financial data. In fact, despite the great potential to open up the retail banking market, the implementation process of this mechanism is going to be crucial for its future success. Interoperability is a priority for the FinTech market and standardization initiatives aimed at defining shared, open APIs, are encouraged in Europe and in other countries (e.g. Australia, Canada, Mexico, Japan, Singapore). For its part, the UK took the lead in the transition towards Open Banking by enacting an array of additional measures aimed at going further than the PSD2 goals and mandating the development of a single, open, standardized API for the whole industry.
Further, we stress that from a competition policy angle, PSD2 accomplishes its goal by creating a general duty for incumbents to grant access, on a non-discriminatory basis, to new entrants who would otherwise be precluded from providing their services. This regulatory intervention proved necessary, as the existing antitrust toolbox is insufficient to ensure consumers enjoy safe and stable access to new, innovative, financial services providers. Indeed, competition law is inherently based on a discrete assessment of the single case at stake. Thus, antitrust enforcement seems unable to target consistently competitive challenges as broad as the needs of the FinTech wave. This does not mean that regulatory intervention alone is enough to make competition and innovation thrive in the retail banking market and payment system. Rather, antitrust enforcement is a complementary tool necessary to address more subtle forms of anti-competitive practices which could not be addressed through regulatory implementation mechanisms. Since incumbents retain strong incentives to foreclose new FinTech entrants and the implementation process of the XS2A rule is inherently complex, traditional banking players can easily engage in subtle forms of anti-competitive practices that risk frustrating the potential of the XS2A rule.
* PhD Candidate, Law Department, University of Turin; MSc in Law and Finance Candidate, University of Oxford; TILT Fellow, University of Tilburg; https://orcid.org/0000-0003-0721-4442; oscar.borgogno@unito.it.
** Jean Monnet Professor of EU Innovation Policy; Associate Professor of Law and Economics, University of Basilicata; Adjunct Professor of Markets, Regulations and Law, and of Legal Issues in Marketing, LUISS and Bocconi University; TTLF Fellow, Stanford University and University of Vienna; https://orcid.org/0000-0002-0089-3545; giuseppe.colangelo1975@gmail.com.
