Open banking sits at the crossroads of finance, technology, and consumer protection. By allowing third-party providers to access and process consumer banking information (with explicit user consent), new service offerings have appeared that change how individuals interact with their finances. While these developments are beneficial, they also bring intricate regulatory responsibilities. Failure to comply with open banking rules and data security standards can result in heavy fines, reputational setbacks, or abrupt business disruptions.
This long read reviews four major regulatory initiatives shaping global open banking’s ecosystem in 2025:
PSD3 (EU)
Open Banking Future Entity Framework (UK)
Dodd-Frank Section 1033 Rule (US)
Retail Payment Activities Act (Canada)
Each framework addresses critical aspects of data usage, consumer rights, and security duties. Taken together, they show a worldwide shift toward more comprehensive standards, stronger consumer protections, and deeper cooperation among financial institutions, fintech firms, and technology partners.
Before exploring each regulation, it is worth emphasizing that compliance, actually, goes far beyond mere bureaucracy. For businesses in the financial arena, compliance forms the bedrock of customer trust. Instituting reliable data safeguards, interoperability, and keeping processes transparent help mitigate legal exposure. Such measures also position organizations to add new services without worrying about sudden regulatory friction.
PSD3 (EU)
The Payment Services Directive 3 (PSD3) is an upcoming legislative instrument of the European Union. It follows the Payment Services Directive 2 (PSD2), implemented in 2018, which required banks to open their payment infrastructures and consumer data (with consent) to approved third-party providers. This shift led to greater competition and fresh financial offerings across EU member states.
However, the rollout of PSD2 revealed certain pain points:
Fragmented standards. Because each EU nation has its own approach, technical standards and regulatory measures vary significantly.
Security inconsistencies. Even though Strong Customer Authentication (SCA) was introduced, many institutions only partially followed guidelines or diverged from common expectations.
Ongoing evolution. As fintech continues to progress, PSD2’s provisions need updates to accommodate new business models and technologies.
To address these shortcomings, PSD3 is expected to tighten data-sharing mechanics, reinforce security requirements, and enhance oversight. Though still under discussion, you can learn more about its progression in the European Commission’s official press releases. Observers predict changes to unify standards, close regulatory gaps, and improve user experiences.
Who is affected and compliance investments
Banks and other financial institutions. Major incumbents need to update existing APIs in line with refined data standards. Budgets for security measures and stronger consumer authentication will likely increase.
Payment service providers (PSPs) and fintech firms. Third-party providers will be subject to new registration and licensing benchmarks. They may also need to strengthen infrastructure and data-handling protocols.
Consumers. While not obligated to comply, individuals benefit from stricter data protection and broader service variety.
Regulators and supervisory bodies. More resources may be invested in data gathering, ongoing audits, and cross-border collaborations.
Risks of non-compliance
Hefty penalties. EU enforcement agencies have shown they can and will levy significant fines against violators. PSD3 may replicate or intensify these punitive measures.
Legal exposure. A major data breach could yield lawsuits, especially if the organization is found not to have applied industry-recommended safeguards.
Loss of market trust. Reputational harm from mismanagement of data can reduce user loyalty and revenue.
Licensing restrictions. Regulators could revoke licenses, limiting a firm’s ability to function in one or more EU member states.
Compliance with PSD3 merges legal, technical, and security knowledge. Firms that fail to engage specialized advisors risk building insufficient safeguards, leaving them vulnerable to breaches and sanctions. Skilled consultants perform rigorous risk assessments, design secure account-access frameworks, and stay updated on the latest PSD3 technical guidelines. Their input reduces the chance of regulatory issues and the associated financial or reputational damage.
UK Open Banking Future Entity Framework
In the United Kingdom, the impetus for open banking initially came from the Competition and Markets Authority (CMA) to break down concentrations of power in retail banking. This gave birth to the Open Banking Implementation Entity (OBIE), which coordinated with the UK’s nine largest banks to create consistent data-sharing and payment-initiation mechanisms.
Over time, the CMA proposed a new entity to succeed OBIE, ensuring continuity and market-driven innovation. Referred to colloquially as the “Future Entity,” this body aims to:
Maintain and develop technical standards. Harmonized data formats remain key to ensuring that banks and third-party providers communicate effectively.
Govern and oversee compliance. Clear security, data protection, and user-safeguard protocols must be followed by all participants.
Strengthen competition. Establishing accessible frameworks ensures that smaller fintech players are not unfairly disadvantaged.
For more detailed references on the evolving open banking framework, view the UK government’s measures to chart the future of open banking.
Who is affected and compliance investments
Banks. Whether long-established or new entrants, UK banking institutions must align their open banking APIs with the entity’s rules and best practices.
Third-party providers (TPPs). Account Information Service Providers (AISPs) and Payment Initiation Service Providers (PISPs) must ensure data transfer aligns with the standardized formats and security measures.
Regulators. The Financial Conduct Authority (FCA) will continue working alongside the Future Entity, balancing consumer protection with market evolution.
Fintech firms. They may face higher compliance costs for meeting the entity’s processes and certifications but also enjoy clearer rules of engagement.
Risks of non-compliance
Loss of API access. Institutions failing to abide by the new standards could be blocked from connecting to open banking APIs.
Regulatory action. Penalties might take the form of financial fines or additional reporting obligations.
Consumer trust issues. Data handling is critical; any signs of misuse or security failures often lead to reputational setbacks.
Reduced capabilities. Non-compliant firms miss out on beneficial new functionalities or partnerships that rely on consistent standards.
Experts in data governance, regulatory law, and cybersecurity help organizations adapt smoothly to the Future Entity’s guidelines. They can advise on how to encrypt consumer account details, structure APIs for easy scalability, and adhere to user-consent requirements.
Dodd-Frank Section 1033 Rule (US)
Enacted after the 2007–2008 financial crisis, the Dodd-Frank Wall Street Reform and Consumer Protection Act introduced sweeping changes to the American financial industry. A section of this law, Section 1033, aims to secure consumers’ rights to their financial data. The Consumer Financial Protection Bureau (CFPB) is drafting rules to clarify how financial data should be shared with third parties.
Key focal points include:
Consumer empowerment. Individuals must have control over how, when, and with whom their data is shared.
Data security. Financial entities must uphold rigorous safeguards to protect consumer data transfers.
Access fairness. Small, mid-sized, and large institutions should observe uniform requirements, preventing barriers to entry.
You can explore the CFPB’s official notices related to consumer access to financial records at the CFPB website on consumer access to financial records (ANPR).
Who is affected and compliance investments
Banks. Even community and regional banks must revamp systems that allow secure consumer data sharing.
Data aggregators. Entities that pool user information from multiple sources need to ensure robust security and compliance with CFPB guidelines.
Fintech services. Firms providing budgeting, investing, or lending tools based on aggregated data must adopt strong identity verification, encryption, and operational controls.
Technology vendors. Companies building application programming interfaces or integration layers may face heightened scrutiny and a push to document robust data-handling processes.
Risks of non-compliance
CFPB enforcement. The agency has wide latitude to impose monetary sanctions or other corrective measures.
Litigation hazards. If data breaches or misuse occur, consumers could file class actions claiming violations of their rights.
Reputational fallout. Security lapses can quickly diminish public trust and hamper client acquisition.
Reduced growth opportunities. Firms that can’t establish secure data flows may fall behind peers who prioritize consumer-centric compliance.
Plowing through the layered financial environment in the United States is no small feat, especially as banks vary widely in scale and governance. Specialists in American finance rules and cybersecurity can tailor solutions that guarantee user-friendly interfaces alongside data integrity.
Retail Payment Activities Act (Canada)
Canada’s Retail Payment Activities Act establishes an updated oversight framework for retail payment service providers, placing them under the watch of the Bank of Canada. Part of a larger push toward open banking reforms in Canada, the Act emphasizes risk control and aims to protect consumers as fintech evolves. You can learn more by visiting the Government of Canada’s Department of Finance page.
Core priorities include:
Risk management. Providers must apply formal procedures to reduce financial and operational threats.
Mandatory reporting. Regular disclosures to the Bank of Canada on risk profiles and compliance updates are required.
Registration and oversight. A more structured registration procedure replaces older, ad hoc approaches.
Who is affected and compliance investments
Payment service providers. Any enterprise facilitating electronic funds transfers or digital wallet transactions must register and adhere to risk standards.
Fintech ventures. Startups focusing on payment solutions must be prepared for deeper scrutiny, from license applications to ongoing reporting.
Banks and credit unions. Though already heavily supervised, they should confirm they meet new obligations.
Consumers. Individuals benefit from uniform protection, decreasing the likelihood of fraud or flawed payment operations.
Risks of non-compliance
Registration denial or suspension. Non-compliant businesses risk losing their ability to operate within Canada’s financial system.
Financial penalties. Substantial fines are an option if providers skirt these requirements or repeatedly fall short.
Reputational harm. Gaps in compliance can result in negative publicity, making it more difficult to attract partners or investors.
Weaker competitive position. Firms resistant to modernizing their payment platforms may see customers migrate to compliant rivals.
Meeting the Act’s mandates often involves upgrading IT systems, documenting risk management practices, and establishing internal controls for day-to-day operations.
The larger perspective on compliance and data expertise
Costs vs. benefits of compliance
While investing in compliance might seem burdensome—especially for smaller ventures—it typically costs far less than dealing with post-incident fallout. Penalties, lawsuits, and brand depreciation can devastate a company’s bottom line for years.
From another angle, implementing robust standards can be an advantage. Consumers are more likely to trust businesses that demonstrate responsible data practices. Clear compliance with frameworks such as PSD3, the UK Future Entity guidelines, Dodd-Frank Section 1033, or the Retail Payment Activities Act can also pave the way for partnerships with major banks and technology enablers.
Long-term operational stability
Open banking is in flux, with new policy initiatives appearing as technology advances. Organizations that adopt detailed compliance strategies can adapt more easily when future directives emerge. Maintaining a state of audit readiness translates into a smoother rollout of new products and services, unhampered by last-minute compliance issues.
Importance of hiring competent data and IT consultants
Risk assessment. Knowledgeable professionals conduct structured reviews of both legal frameworks and technical setups, recommending refinements as needed.
Detailed documentation. Agencies often demand thorough transaction logs, data-consent proofs, and incident response plans. Automation and standardized documentation alleviate the burden.
Secure architecture. Safeguarding consumer banking details against unauthorized access necessitates deep expertise in encryption, segmentation, and best practices in software design.
Audit preparedness. A fully documented compliance framework eases the stress of government or third-party assessments.
Data transformations. Many organizations handle vast quantities of data from multiple sources. Skilled consultants can set up pipelines for consolidating and converting data into consistent formats. They develop processes that maintain accuracy, align with regulatory requirements, and enable efficient data analytics.
Consequences of avoiding expert guidance
Companies that fail to recruit specialized consultants may misconfigure critical systems, leaving them open to data theft or regulatory action. Oversight bodies generally exhibit little leniency toward repeated or severe non-compliance. Once consumer trust is eroded, rebuilding a positive reputation is complicated and costly.
Get data compliance consulting and AI-powered data solutions
Open banking presents wide-ranging prospects for financial institutions, fintech firms, and technology vendors. Yet compliance with PSD3 in the EU, the UK’s Future Entity Framework, Dodd-Frank Section 1033 in the US, or Canada’s Retail Payment Activities Act in their respective areas of jurisdiction is necessary for avoiding penalties and safeguarding brand reputation. A thorough approach to data protection and process transparency is no longer optional—it is a foundational part of participating in modern financial markets.
Blocshop offers specialized data transformation services and AI-powered data solutions that help organizations navigate evolving regulations - our experts understand all the technical fine points. Collaborate with us to create secure, efficient, and forward-looking systems in the financial sector.
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