Open Banking and the Ambiguous Competitive Effects of Data Portability

In recent years several interventions have been undertaken to encourage competition by promoting access to data and facilitating data sharing and portability. The banking sector has been usually designated as a testing ground. Indeed, data play a central role in the provision of FinTech-enabled services and, since transaction data are jealously conserved by legacy banks, the commercial viability of FinTech players is undermined by the lack of access to this essential resource. Against this backdrop, by reducing switching costs and promoting multi-homing the Open Banking has emerged as a new competitive paradigm which would allow firms and consumers to enjoy simultaneous and frictionless services and products offered by different providers. However, the sharing of account information may also favour the entry of large online platforms. Therefore, concerns have been raised about the effectiveness of data portability in fostering market competition.

By Oscar Borgogno¹ & Giuseppe Colangelo²

I. INTRODUCTION: ECONOMIC RATIONALES AND UNINTENDED CONSEQUENCES

Technological innovation is opening up a new battleground for competition in the payment and banking industry. Emerging digital technologies bring new competitive tools and business models that could encourage consumer switching. More generally, data control could raise individuals’ awareness of alternatives, thereby increasing their decision-making skills in digital markets.

This technology-led transition could pro