The FIDA Proposal: Striking a Balance between Data Protection and Financial Innovation

Abstract

This thesis, titled "The FIDA Proposal: Striking a Balance Between Data Protection and Financial Innovation", explores the European Commission's Financial Data Access (FIDA) proposal, introduced in 2023 as part of the EU's broader strategy to digitize finance. FIDA aims to enable secure sharing of financial data across institutions, fostering innovation, competition, and consumer empowerment while ensuring compliance with the General Data Protection Regulation (GDPR). By expanding the scope beyond the Payment Services Directive (PSD2) to include products such as insurance, loans, and investments, FIDA represents a significant step towards achieving open finance in Europe.

The research addresses the core challenge of balancing the benefits of financial innovation with the stringent demands of data protection. It identifies key tensions in the framework, including heightened risks of data breaches, complexities in consent mechanisms, and the potential for algorithmic biases. The analysis critiques FIDA’s proposed tools, such as permission dashboards, which aim to provide consumers with greater control over their data but may fall short in ensuring meaningful transparency and accountability. Furthermore, the thesis explores the challenges small and medium-sized enterprises face in meeting FIDA's compliance requirements, which could stifle competition and innovation.

To address these issues, the thesis recommends actionable solutions to refine FIDA's framework. These include the implementation of robust data governance practices, clearer and more user-friendly consent mechanisms, and regulatory support for smaller market participants to ease compliance burdens. It also suggests enhancing transparency measures and promoting consumer education to build trust in the financial data-sharing ecosystem.

The thesis concludes that while FIDA is a transformative initiative with significant potential to enhance innovation and consumer empowerment, its success hinges on carefully balancing these objectives with robust data protection. By addressing its current limitations, FIDA can create a secure and trustworthy digital financial ecosystem that prioritizes both innovation and individual rights. This research contributes to the academic and practical discourse on the interplay between financial technology, regulation, and data privacy, providing insights into how Europe can lead the way in shaping the future of open finance.