In September 2019, PSD2 went live in the EEA. Malta was the first country in the world with clearly established regulatory frameworks for DLTs, ICOs and virtual currenciesand Maltese banks already offer open banking.
Open banking is banking practice that securely shares financial information such as consumer banking, transactions and other financial data to third-party financial service providers (Estevez, 2020). Sharing data is done through the use of application programming interfaces (APIs) and only with the consent of customers (The Balance, 2020). Open banking is the drive behind both innovation and competition in the financial industry (Cahill, n.d.).
PSD2 is a European Directive that regulates electronic payment services, was implemented in all EEA countries in 2016 and went live in September 2019.
Malta was the first country in the world with clearly established regulatory frameworks for DLTs, ICOs and virtual currencies (KSi Malta, n.d.). Recently the world’s first regulated ICCO launched in Malta- Palladium launched a fully regulated Initial Convertible Coin Offering which bridges together traditional financial services and crypto currencies (KSi Malta, n.d.).
The Maltese government has prioritised boosting digital technologies as a way to improve the country’s competitiveness. Initiatives such as blockchain and DLT strategy as well as a regulatory framework were implemented to attract operators (DESI, 2020, 10). Furthermore, the government has established the Malta Digital Innovation Authority (MITA) (DESI, 2020, 10). In October 2019, the maltese government adopted a national strategy on AI and is planning to set up a Digital Innovation Hub (DESI, 2020, 11).
Malta already has an Innovation Hub created by MITA that has accelerated 11 innovative startups covering technologies such as AI, Internet of things and blockchain (DESI, 2020, 11). Furthermore, theMalta Financial Services Authority is focusing its efforts towards supporting digitalisation and innovation through establishing a fintech sector. The MFSA has developed a regulatory sandbox where fintechs can test their innovations without being subject to standard regulations(MSFA, n.d.).
Of all Maltese citizens using the internet, 63% use the internet for online banking, which is 3% below the EU average (DESI, 2020, 9). Additionally, on integration of digital technologies, Malta ranks 7th among EU countries (DESI, 2020, 10). Furthermore, Malta ranks 11th in the EU for digital public services (DESI, 2020, 12).
Malta has a total of 24 banks, the largest of which include Bank of Valletta and HSBC Bank Malta.
Open banking uses an API that allows financial institutions to exchange financial data, usually through a third party-developed application (Estevez, 2020). These applications are developed by up and coming FinTech companies with the mission to improve digital banking.
To access and use the open banking APIs in Malta, you will need to acquire an account information service provider license, issued by the relevant authority. Furthermore, you will require a relevant certificate (QTSPs or eIDAS), compliant with PSD2 requirements. Alternatively, you can use an open banking platform, such as Nordigen.
The Balance. (2020, October 11). What Open Banking Is and How It Will Affect You. https://www.thebalance.com/what-is-open-banking-and-how-will-it-affect-you-4173727
Cahill, H. (n.d.).InvoiceFair. The Evolution of Open Banking: Connectivity breeds digital competition. https://invoicefair.com/the-evolution-of-open-banking-connectivity-breeds-digital-competition-081118/
DESI. (2020). Malta.Digital Economy and Society Index (DESI) 2020, 1-13.
Estevez, E. (2020, August 27).Open Banking. Investopedia. https://www.investopedia.com/terms/o/open-banking.asp
KSi Malta. (n.d.).Fintech. KSi Malta. https://www.ksimalta.com/en/fintech-industry
MSFA. (n.d.).FinTech Regulatory Sandbox. MFSA. https://www.mfsa.mt/fintech/regulatory-sandbox/
Nordigen is an authorised Account Information Service Provider. We provide free access to bank data and premium data insights, using regulated PSD2 connections.