European Union
The world's largest open banking market by geography, with lessons on both the benefits and challenges of a principles-based regulatory approach.
Overview
The Payment Services Directive 2 (PSD2) was the European Union's landmark regulation requiring banks to provide access to customer account data and payment initiation services to licensed third parties. Implemented in 2018, it covers all 27 EU member states plus EEA countries.
Unlike the UK's prescriptive approach, PSD2 was a principles-based directive that left significant implementation decisions to member states and individual banks. While this created a massive market, it also led to fragmentation with thousands of different API implementations.
The European Commission is now working on PSD3 and a broader Open Finance framework that will address lessons learned and extend access beyond payments to other financial products including insurance, investments, and pensions.
EU vs UAE Approach
| Aspect | EU (PSD2) | UAE |
|---|---|---|
| Scope | 27 countries, varied implementations | Single unified market |
| API Standard | Multiple (Berlin Group, STET, Polish API) | Single CBUAE standard |
| Central Directory | National registries, no unified directory | Al Tareq serves as central directory |
| Enforcement | National regulators with varied approaches | CBUAE as single authority |
Timeline
Lessons for UAE
Principles vs Prescriptions
PSD2 set principles but left implementation details to member states and banks. This led to 4,000+ different API implementations across Europe.
UAE's prescriptive approach via Al Tareq avoids this fragmentation.
Screen Scraping Fallback
Poor API quality forced regulators to allow fallback to screen scraping, undermining the original intent of secure, standardized access.
UAE can learn to enforce API quality standards from the start.
Consumer Awareness Gap
Surveys show most EU consumers don't know about their data sharing rights. Awareness campaigns lagged behind technical implementation.
UAE should invest in consumer education alongside technical rollout.
Beyond Payments
PSD3 and the proposed Open Finance framework expand beyond payments to insurance, investments, and pensions.
UAE's "Open Finance" framing already positions for this broader scope.
What's Next: PSD3 & Open Finance
PSD3
Building on PSD2 with stronger API standards, improved SCA exemptions, and better consumer protection. Expected to reduce fragmentation with more prescriptive technical standards.
Payment Services Regulation (PSR)
A directly applicable regulation (not a directive) that will ensure consistent implementation across all member states without national interpretation.
Open Finance Framework
Extends data sharing beyond payments to mortgages, savings, investments, insurance, and pensions. Creates a comprehensive financial data sharing ecosystem.