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Open Banking

Open Finance

From its position in the middle of the Mediterranean Sea, Italy Italy is taking steps in the right direction, but needs to move quickly to keep pace with Open Banking innovation across the continent.

According to Merchant Machine, 90% of Italians had access to the internet in 2021. Of all Italians using the internet, 48% use the internet for online banking, which is 18% below the EU average. Additionally, Italy ranks 8th in the integration of digital technologies and 19th for digital public services among EU countries.  

Italy falls under the PSD2 legislation and has adopted Berlin Group’s NextGenPSD2 standard. PSD2 is a European Directive that regulates electronic payment services and was implemented in all EEA countries in 2016 and went live in September 2019.

In their European Open Banking league, Yapily ranked Italy 16 out of 18. According to Yapily, Italy had very low supervision of Open Banking standards and a very slow regulatory response. PSD2 was adopted; however, no changes were made or added to the original legislation around Open Banking. However, the adoption of Open Banking in Italy is gaining momentum as the country begins to transform its payments landscape. Italy improved its score by 1.2 points from 2021, showing positive signs of progress and a clear desire to accelerate Open Banking from players across the ecosystem.

Italy uses the Berlin Group’s NextGen PSD2 standard, but general payments implementation (outside of single domestic payments) is very poor. Yapily suggests that Italy needs a speedier and more agile regulatory approach for Open Banking to take off. The regulator could set up a dedicated Open Banking support team to help firms navigate the regulatory environment or provide guidance to PSD2 implementation.

Yapily acknowledges that while Italy is taking steps in the right direction, it will need to move quickly to keep pace with Open Banking innovation across the continent. With many businesses utilising Open Banking in the region, tighter supervision of regulatory standards would help boost this further. Currently, inconsistencies in this area are creating challenges for Third-Party Providers (TPPs) and companies to offer a high-quality service to their customers. 

The EU Commission has announced its intention to adopt an Open Finance regulatory framework.

Sustainable co-creation of value is seen as a necessity, through positive collaborations between banks who hold the “Customer Base”, “Capital” and a sound “Know-how” and Third Party Providers (TPPs) who hold digital expertise and solutions. Collaborations with the Central Bank of Italy (CBI) is expected to break down the existing technological barriers enabling exchange of data between banks, third-parties and technical providers, ensuring interoperability and circularity of financial transactions, which maximise benefits to customers. Through the interconnectedness offered, CBI is currently considered an agent and enabler of change in the banking sector. 

The CBI aims to promote active innovation within banks and other financial intermediaries to increase functionality and interoperability internationally.

According to The Global Findex Database, 97% of Italian adults had bank accounts in 2021. In a recent study researching Open Banking adoption among consumers, Italian consumers scored higher than average Europeans in all areas measured. 39% of Italian consumers were interested in receiving intelligent assistance to manage payments, 35% were interested in having their data used to develop convenient new payment methods, 31% having their data used in aggregating financial information and storing it in one place and 33% in having their data used to offer a better range or better quality of services.

The Italian Government has begun a progressive shift toward cashless payments by enforcing regulations that encourage the use of digital payments and foster an environment for Fintechs to thrive. 

The Italian Government and the Insurance Supervisory Authority (IVASS) aim to maintain an adequate level of market and consumer protection and offer fair regulatory treatment to existing and new operators. 

There were 345 Fintechs operating in Italy in 2021. The use of Fintech technologies in the Italian financial industry has been increasing over the last few years. Spending on technological-financial innovation for the two years 2021-22 amounts to €530 million, up on the previous two years (from €456 million). Over 2020 and 2021, the number of investor banks also rose (from 77 to 96) as did projects (from 267 to 329), suggesting a greater take-up rate of innovative technologies within the financial system. 

The Bank of Italy’s Fintech survey 2021 also reported that the share of investments in Application Programming Interfaces (API) and IT infrastructure remained high, accounting for 58% of expenditure in 2021.

The progressive digitalisation of banking and financial services has pushed anti-money laundering processes towards technologies that allow adequate remote verification using digital IDs, digital certs and biometrics. However, the adoption of solutions based on artificial intelligence (AI) remain limited, owing to issues around customer risk and the monitoring of suspicious transactions.

Despite being traditionally a cash-based country, Italy saw ATM withdrawals decreasing by 20% since the start of the pandemic, while the total volume of transactions on Mobile Banking grew by 56%. Smartphone usage reached the PC for Digital Banking operations and Mobile Commerce is now worth 51% of the total eCommerce market.

Italy ranks 22nd in human capital among EU countries in the Digital Economy and Society Index (DESI) 2022. The human capital measures digital skills, the proportion of employed people working as ICT specialists, female ICT specialists, and enterprises offering ICT training.

In 2019, Italy introduced a regulatory sandbox, which enables Fintechs to test their innovations without the risk of infringing on regulatory requirements. Through the sandbox, the supervisory authorities aim to support the growth and development of the Italian Fintech market while guaranteeing adequate levels of consumer protection and competition and safeguarding financial stability. At the same time, the supervisory authorities can observe the latest technological developments and identify the most appropriate and effective regulatory interventions to facilitate the development of Fintech, thereby limiting the spread of potential new risks from the outset.

Furthermore, Italy introduced a Fintech committee within the Ministry of Economy and Finance with the purpose of identifying objectives, defining programs, drafting regulatory proposals and facilitating a relationship between authorities and operators. 

Italy has adopted the Berlin Group’s NextGenPSD2 technical standard.