🎥  Pressed for time? Watch the latest Insight Out episode for a breakdown of open finance, PSD3, and the key shifts shaping open banking in 2025 and beyond.

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We sat down with our Go-to-Market Director, Frankie Elmquist, to talk about one of the biggest shifts we are seeing in our industry: the move from open banking to open finance. In this conversation, Frankie unpacks the journey that began with PSD2, what the evolution from open banking to open finance means in practice, and why the market is pushing beyond payments and data.

Can you talk briefly about the back story behind how open banking came into play and how that connected to PSD2?

Sure! So, Open Banking is actually a regulatory and opportunity that was created in response to the financial crisis in 2007-2008. When the markets crashed, we realised that 80% of markets were controlled by a small number of big banks and Visa and Mastercard. Particularly Mastercard, because they are also an infrastructure provider for the bank system. The crash was a wake-up  call that there the payments system needs to be more resilient. To address that, the EU introduced the Payments Services Directive (PSD1), which focused on standardization and transparency in the payments industry.

PSD2 followed in 2015 to introduce more competition in the payments market by allowing licensed third-party providers (TPPs), like Neonomics, to access to the bank accounts to initiate Account-to-Account payments or to share account information, like a couple months of transaction history, with consumer consent, through secure APIs. Hence, the term, “Open Banking".

You’ve said we’re now moving beyond open banking into open finance — what does that shift look like in real life?

We’re now 10 years into PSD2, and we are about to go into a new regulatory phase under PSD3 in 2026. Unlike the previous PSDs, PSD3 is a series of regulatory packages:

·      PSD3 which will clarify and standardize the rules around licensing across the EU making them generally stricter.

·        PSR1, the Payments Service Regulations, making what were previously directives and open to interpretation by member states into hard rules.

·      FIDA, the financial data access regulations, which we discussed in the previous series.

What this package does is broadens the types of accounts that TPPs, like us, can access beyond just spending accounts to include savings, pensions, insurance and investment accounts. So, it’s access to more comprehensive financial tools.

Why is this change happening now? What’s driving the need to go beyond payments and data?

Two reasons:

1.       Digitalization: There has been an overall push by the EU to modernize the financial system, making it more digital, less fragmented and resilient. The 2020 Pandemic really brought this need to the forefront and has accelerated the transition.

2.       Financial health and well-being: The fallout from the pandemic has impacted everyone emphasizing the need to be more prepared and less vulnerable financially.

To achieve this, our financial systems needs to be more accessible and inclusive. There are just fewer bank branches now, so you can’t just pop down to your local to talk about getting a mortgage or opening an investment account where they know you and your situation in a way that you could even just 20 years ago.

The number one pain point end-users talk to us about, is that they are struggling to get an overview of their finances and/or access to the financial services they need.

PSD3 and FIDA, in particular, is going to make that easier for businesses, consumers and financial services.

Who stands to benefit the most from open finance — and who needs to start paying closer attention?

I might be an optimist, but there’s benefits all around if you’re open to change.

For consumers and businesses, it’s the opportunity to provide a more holistic picture of your financial situation to get more personalized offers and opportunities to improve your finances.

For providers, it’s the opportunity to get the right offer, in front of the right customer, at the right time - which increases the chance that they’ll take it that opportunity and be happy with your company for it. It also reduces risk, because you will know that this product is a good fit for the customer, reducing churn and loss.

Will it introduce more competition in the market, YES. Is that a bad thing, NO. Whether we like it or not, we are in a period of mass digitalization, change and opportunity. Those who embrace it will reap the benefits reducing their operational expenses, increasing retention, and attracting new customers.

Open Banking was just the start. Open Finance broadens the opportunity by unlocking smarter credit scoring, embedded lending, more personalised financial products. At Neonomics, were providing the tools to harness that opportunity.

Learn More

To learn more about where the industry is headed and the opportunities on the horizon, follow us on Linkedin and download our latest white paper where we explain what’s next for open banking beyond 2025 and more.