In 2015, the EU adopted the revised Payment Services Directive (PSD2) and the U.K. followed suit in 2016 with the Competition and Markets Authority Open Banking mandate (CMA). While these standards do not apply in the Unites States, they could have significant impact on American payments systems and banking.

The standards were enacted to implement open banking in Europe. With a goal of driving innovation in the banking industry, open banking generally requires the traditional leaders among banking institutions to share
customer financial information with specified third-party providers (TPPs)—provided the customer consents. But the new laws likely will have the unintended side effect of weakening the closely guarded relationships these incumbent financial institutions have with their customers. Fintech companies that offer innovative products and services to consumers are likely to benefit, because they could leverage customer financial information to help them lure customers from less data-savvy incumbents.

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