For years, Open Banking (PSD2) was fintech’s north star, revolutionising payments by unlocking access to bank transaction data. Now, the EU Data Act is here to unlock data from the physical world, creating a new and vastly larger frontier for financial innovation.
While PSD2 gave access to a customer’s financial past, the Data Act grants access to their physical present—the real-time performance and usage data from their connected devices. For the fintech sector, this is a game-changer.
From Open Banking to ‘Open Everything’
The Act builds on the principles of Open Banking but expands them exponentially. It mandates that users of connected products—whether a consumer with a smart home or a business with a fleet of vehicles—can compel the manufacturer to share device data with a third party of their choice.
This positions fintechs to become the integrators of a consumer’s entire data life, combining financial information from banks with lifestyle data from utilities, smart appliances, and electric vehicles to create truly holistic financial management apps.
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A New Frontier for Financial Products
This new river of real-world data is set to reshape core financial services, creating products that were previously impossible:
- Hyper-Personalised Insurance: Insurtechs can move beyond basic telematics. Now, they can access sensor data directly from a John Deere smart tractor or a Siemens factory robot to offer dynamic insurance premiums based on actual wear-and-tear.
- Smarter Asset-Backed Lending: Instead of just looking at a balance sheet, a lender could offer financing to a logistics firm based on real-time performance data from its fleet of Daimler or Scania trucks, radically de-risking the loan.
- Verifiable ESG Finance: The Act provides a weapon against greenwashing. A sustainable investment fund can request verifiable energy consumption data directly from a company’s smart building management system, replacing self-reported estimates with hard proof.
Beyond Products: New Rules of the Game
The impact of the Data Act extends beyond new product creation to the very infrastructure of the fintech industry.
One of the most significant but overlooked provisions is its aim to reduce cloud vendor lock-in. The Act introduces rules to make it easier and cheaper for companies to switch between cloud providers like AWS, GCP, and Azure. For digital-native fintechs, this breaks the monopolistic hold of the big three, increasing flexibility and reducing operational costs.
However, this new power comes with greater responsibility. The Act is designed to be complementary to GDPR, meaning fintechs handling IoT data will face a higher regulatory burden. Navigating the grey area where non-personal device data (like a car’s location) can become personal information will be a major compliance challenge.
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The Race Is On
The EU Data Act provides the legal rails for a new data economy, tasking the fintech industry with building the financial layer for the physical world. The winners will be those who can navigate the compliance hurdles to create compelling products that offer undeniable value in exchange for data access. The race is on to become the “Plaid” for the Internet of Things.
