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A timeline creating a need for speed
We currently expect FiDA to become fully effective by early or mid 2027. While this might appear to provide a substantial period for preparation, our experience of working with financial institutions facing regulatory changes suggests it is anything but – given FiDA’s scope and likely impact. Furthermore, adapting to FiDA will have significant costs that need to be considered. Given many financial services companies do their budgeting in late summer or early autumn, and that costs for adapting to the new rules for individual companies could easily run into tens of millions of euros, there is a clear need to start planning now.
Choosing a level of strategic ambition
When our teams initially started looking at potential approaches to FiDA in mid-2023, we identified three broad approaches:
- Compliance only, meaning a company does the minimum required to meet the rules;
- Defensive, meaning the company not just meets the rules but takes steps to enhance its offering with a view to maintaining market share;
- Aggressive, meaning the company uses the changes to try to win new customers.
However, having studied the regulation and its implications, and spoken with numerous industry executives, our thinking has evolved. We now believe that a compliance-only approach can pose real risks in terms of customer loss, and even a defensive approach will probably require a more ambitious strategy to maintain market positioning. In particular, just meeting rapidly changing customer expectations will require proactive effort and innovation. Meanwhile, we expect a significant number of companies, from established players to new entrants, to aggressively capitalize on the huge opportunities presented by data-sharing. This will likely lead to new business models and services designed to nourish and benefit from the emerging data-sharing ecosystem.
Acting now to prepare
Whichever level of ambition a company ultimately chooses, there are several key steps that management should take. First, they need to start setting out their strategic vision and define their key ambitions. This may prove more challenging than it sounds given the vast number of financial-data use cases, the ways in which customers may behave, and how competitors including new entrants may respond.
Second, they should consider their company’s particular situation and business models. For example, a diversified financial services company will need to ensure that business units such as banking and investment management coordinate their actions. One way to achieve this is to use an impact assessment that not only identifies issues but, by being conducted at a firm-wide level, also helps ensure a joined-up approach and avoid siloed thinking.
Furthermore, management teams will need to allocate investment effectively, focusing on the opportunities that promise the best returns. This requires an understanding of potential target operating models and investment requirements, as well as existing IT and infrastructure.
Together these steps can form the basis for an initial implementation roadmap, with clear planning and corresponding cost estimates. This provides a necessary foundation for the pathway to execution: technical planning, understanding the data access schemes that will enable and govern data sharing, prototyping and the full range of development needed to implement the chosen strategy. How well companies conduct these steps is likely to play large role in the success, or otherwise, of their approach to FiDA, and to the opportunities and threats it will bring.