A coalition of 62 financial technology (fintech) firms including Klarna and Trustly and lobbying organizations such as the European Fintech Alliance (EFA) are fighting plans by the European Banking Authority (EBA) to ban screen scraping of customer data from online banking interfaces.
The screen scraping ban would come into force as part of the draft regulatory technical standards (RTS) rule under the European Union's (EU) revised Payment Services Directive (PSD2) regulation.
Screen scraping is the process of collecting screen display data from one application and translating it so that another application can display it. This is normally done to capture data from a legacy application, such as an IBM mainframe computer for instance, in order to display it using a more modern user interface such as a PC or mobile. However, it can also be used to steal data or, depending on your point of view, legitimately gather business intelligence.
The EBA proposals are meeting fierce resistance from European fintechs that have signed a manifesto to fight the plan. They argue the RTS amendment has the "potential to negatively impact our companies' business models", and could "reverse what has been achieved by fintech companies over the last years in Europe".
The manifesto argues that the RTS amendment unfairly positions the banks as "gatekeepers of the fintech sector" and enables them to fight off competition from newcomers to the market.
PSD2 is supposed to increase competition and innovation in European payments and retail banking services by opening up access to customer data to alternative non-bank providers, often technology companies.
But the EBA amendment is proposing to allow European banks to deny this type of direct access, or screen scraping as it is more commonly known, if it provides a back door to an unapproved Application Programming Interface (API).
Banks argue that they need to protect this to ensure security, data protection and so forth, but it also restricts access. Customer could also give their permission for their data to be shared.
"The proposed [RTS] standards are not only inconsistent with PSD2," the manifesto states "but they will force fintechs to become technologically dependent on banks" as they will require approval to be given to anointed partners.
The manifesto goes on to call for policymakers "to align the RTS with the PSD2 text, so that it no longer forecloses specific technologies, such as direct access, and preserves technology neutrality and consumer choice in the payment space".
The arguments over PSD2 mirror the 'open banking' debate that is going on in the U.K. and other nations around the world where regulators want to encourage fintechs to enter the banking and payment services marketplace by giving them easier access to customer data controlled by banks. The idea is that this will encourage newcomers to develop new apps and comparison tools, in particular, which can make price and service differences more apparent to customers. This could persuade them to switch accounts more frequently and encourage competition and innovation.
A more open 'API banking' environment, where apps could be developed by anyone and services can be added to a standardized banking framework, has long been a dream of technology evangelists. The topic was much debated at the recent 2017 SWIFT Business Forum in London and will continue to shape the sector for years to come.
An example of a new data aggregator comparative tool that is currently in closed beta testing is ING's Yolt app. This was launched to a restricted test audience in the U.K. late last year to try to give the Dutch headquartered bank a way to eventually get back into the British market.
Yolt illustrates how the banking industry could be disrupted in future years in a similar manner to the insurance industry's struggle with comparison websites such as GoCompare or the challenge to hotels evident from the Trivago comparison website. Yolt can compare bank account fees, interest and numerous other money management functions such as energy or insurance options, depending upon who partners with the mobile app to reach its customers.
In the case of Yolt, the more open banking environment being encouraged by the U.K.'s Competition and Markets Authority (CMA) is being exploited by a bank that wants to break into a new country. It could equally be used by a fintech firm, however, that wanted to disrupt the oligarchy that exists in many national banking markets that have come to be dominated by a small number of massive institutions. A lack of competition can lead to high bank charges.