Navigating the complex landscape of global financial regulations, we’ve gathered insights from top fintech leaders, including CEOs and finance experts. From the revolutionary impact of PSD2 to the significant role of GDPR in data security, explore the four pivotal regulatory changes that have reshaped fintech development, answering the question: “Which financial regulation changes impacted fintech development?”
- PSD2 Revolutionizes Fintech Access
- GDPR Enhances Fintech Data Privacy
- Regulatory Sandboxes Foster Fintech Innovation
- GDPR Impacts Fintech Data Security
PSD2 Revolutionizes Fintech Access
When it comes to regulatory impact on fintech development, nothing comes close to PSD2. This EU regulation has created a new, level playing field for market players of all sizes, from fintech startups to established banks. It has had a ripple effect on other markets around the world, inspiring similar regulatory frameworks and fostering global innovation in fintech.
The Payment Services Directive (PSD2) – the EU law effective from 2018, has revolutionized the fintech sector by requiring banks to provide third-party providers (TPPs) access to payment services and customer account information through open APIs. This has democratized financial data access, fostering the development of personalized financial tools and seamless payment solutions. Enhanced security measures like strong customer authentication (SCA) have increased consumer trust, prompting both fintech companies and traditional banks to innovate and collaborate more effectively, resulting in a dynamic and consumer-friendly financial ecosystem.
PSD2’s impact has extended beyond the EU, inspiring similar regulations worldwide. Countries such as the UK, Australia, and Canada have launched their own open banking initiatives, driven by the benefits observed in the EU. PSD2 highlighted the benefits of open banking, prompting also US financial institutions and fintech companies to explore similar initiatives voluntarily.
This has led to a global surge in fintech innovation, with financial institutions and fintech companies offering more integrated, personalized, and secure services. The EU’s leadership in open banking through PSD2 has set a global standard, promoting regulatory harmonization and fostering an interconnected, innovative global financial ecosystem.
Looking forward, the EU proposals of PSD3 and Financial Data Access (FIDA) regulations promise to further advance open banking. PSD3 aims to refine and build upon PSD2, with a focus on improving transaction security, fraud prevention, and integration between banks and TPPs. FIDA will expand data sharing beyond payment accounts to include areas like insurance and investments, paving the way for more comprehensive financial products and services.
These developments are set to further enhance connectivity, efficiency, and innovation in financial services, solidifying open banking as a key component of the global financial infrastructure.
Sebastian MalczykGeneral Manager, Experienced Tech & Product Advisor Fintech, Insurtech, Miquido
GDPR Enhances Fintech Data Privacy
Data privacy and protection have been taken to another level by the General Data Protection Regulation (GDPR), forcing fintech companies to strengthen their data management. In compliance with GDPR, organizations must ensure personal data is processed fairly, transparently, and securely.
This has led to increased innovation in fintech towards technologies such as encryption and anonymization for data protection. GDPR was described as a top priority in data protection strategies of 92% of US-based companies surveyed by PwC.
Ariful IslamFinance Expert, Sterlinx Global
Regulatory Sandboxes Foster Fintech Innovation
Since the Financial Conduct Authority (FCA) in the United Kingdom was the first to launch Regulatory Sandbox frameworks in 2016 to let fintech startups explore new products and services, similar frameworks have been introduced in other countries.
This has decreased the “chilling effect on innovation” caused by a “one-size-fits-all” regulatory approach, which would also require machines to be built to complete regulatory compliance before any testing. Successful applications within sandboxes give regulators confidence to move forward and address gaps in laws, regulations, or supervisory approaches. This has led to the widespread adoption of new technologies and business models and helped channel the dynamism of the private sector while keeping consumers protected and imposing appropriate regulatory requirements.
George BlandfordCo-Founder, UK Linkology
GDPR Impacts Fintech Data Security
One big change in financial regulations that really impacted fintech is the General Data Protection Regulation (GDPR) from the EU in 2018. I’ve seen how GDPR has pushed us to focus more on user privacy and data security.
GDPR means we have to handle personal data much more carefully. At Leverage, we had to step up our game to meet these new rules. We improved our data encryption and started doing regular security checks. It was a bit of a hassle at first, but it made our systems a lot more secure.
For example, we added features that give users more control over their data, like easy consent tools and clear privacy notices. These changes helped us follow GDPR and made our clients feel more confident in how we handle their information.
I believe GDPR has made fintech companies, including us at Leverage, more transparent and secure. It’s helped build trust with our users, showing them we’re serious about protecting their data.
Rhett StubbendeckCEO & Co-Founder, Leverage Planning