Dr. Ruth Wandöfer, a key figure in European finance, discusses the history of open banking from PSD to PSD3. She explores the impact of Web3 and CBDCs on our digital society, emphasizing the need for a Digital Social Contract.
PSD1 sparked FinTech growth by legitimizing payment providers and boosting competition in Europe.
PSD2 shifted to consent-driven APIs, birthed European Open Banking, and catalyzed global financial reform.
PSD3 aims to standardize payment institutions, enhance transparency, and reinforce Open Banking principles for improved APIs and competition.
Deep dives
PSD1 and the Emergence of FinTech Innovation
Introduced in 2007, PSD1 opened the floodgates of FinTech in Europe by recognizing payment providers as legitimate, increasing competition. This led to the rise of Neo-Banks, offering alternatives in payments without the ability to take deposits or provide loans, yet capturing a significant market share.
PSD2: Responding to the Financial Crisis
In response to the 2008 financial crisis, PSD2 aimed to rebuild trust in banks by allowing Fintechs to manage money. Screen scraping, which used customer credentials for data access, prompted the shift to consent-driven APIs. This birthed European Open Banking and set the stage for global financial reform.
Previewing PSD3 and PSR for Enhanced Regulation
PSD3, the third Payment Services Directive proposal, will harmonize payment institutions, while PSR seeks to standardize rules across Europe under a single regulation. This shift from directives enhances transparency and competition, offering improved APIs and reinforcing Open Banking principles.
Towards a Digital Social Contract and Re-Decentralization
Championing a future of digital finance, Ruth stresses the need for a digital social contract, re-centering humans in the digital ecosystem. Through re-decentralization, the focus must be on empowering users, promoting transparency, and ensuring that data ownership rights are upheld.
The Essence of Open Banking and the Future Perspective
Open Banking's core revolves around data ownership, questioning who controls personal information. As Ruth advocates for a digital social contract and re-decentralization, she envisions a future where technology serves people, fostering inclusivity and value through a human-centric approach.
Europe, widely considered the birthplace of open banking, has been on a journey to digitize their financial system for over 20 years. In this episode, we speak to a guest who has been on that road since the beginning, at the nexus of finance, technology and regulation. Dr. Ruth Wandhöfer has been instrumental in shaping the future of finance in Europe, having positioned herself as one of the leading experts in the region. She is a widely sought after speaker, writer and professor, with her opinions published in Sifted, The Financial Times and Forbes. She has published three books on digital finance, most recently, Redecentralisation – Building Our Digital Financial Ecosystem in 2023.Together, Eyal and Ruth delve into the origin of open banking in Europe, from the original Payment Services Directive to PSD2 , through to the future under PSD3. They then go well beyond, as they explore the future of our digital society at large.
Specifically they discuss:
•The history of open banking
•Going from PSD to PSD2 to PSD3
•How Web3 and CBDC will play a role
•The Digital States that run our lives
•Creating a Digital Social Contract
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