By Ralf Ohlhausen, Business Development Director, PPRO Group
On 23 February, the European Banking Authority (EBA) announced its intention to outlaw ”screen scraping” in one of their Regulatory Technical Standards (RTS) complementing the revised Payment Services Directive (PSD2), set to come into force in January 2018. Screen scraping sounds sinister. In fact, it simply refers to the practice of automating any internet browsing interaction, in this case with a bank, using their existing, direct customer user interface (online banking) with the customer’s permission. Therefore, let me rather call it “permitted automated direct access”, which describes it better and is less derogative.
The EBA suggests that banks can deny this type of “direct access” through their front door, if they are providing another “indirect access” possibility via a new to be developed API at their back door. Customers, the argument goes, are being trained to enter their online banking credentials into third-party websites and banks do not have an adequate oversight of who is accessing their customers’ data.
Infantilising the consumer
The problem here is that we’re engaging with perception rather than dealing with substance. Consumers who share their login credentials with a PSD2-licensed fintech company are making an informed decision. They have complete control — and oversight — over who accesses that data. And that’s the crucial point: the consumer is in control, not the bank and not the fintech. And that’s exactly as it should be.
Of course, consumers must be protected against malicious “phishing attempts”, which is what the PSD2 security elements mentioned below are all about, but that applies to bank and fintech websites in the same way and also independently of using front or back doors.
Sharing login details between reputable financial services companies, subject to a competent financial regulator (for instance, the FCA in the UK or the BaFin in Germany) is perfectly secure. Such companies are regularly audited and must, by law, take all necessary technical, legal, and procedural steps to protect consumer data. This absolutely includes login details, but also includes the actual financial data itself. If they make a mistake, they are liable for providing restitution — so you can bet your bottom dollar that they are serious about not making mistakes.
As a matter of fact, the new General Data Protection Regulation (GDPR) stipulates that consumers shall be enabled to access all their data, retrieve it and share it – or not – depending on their explicit consent. The only feasible technology for achieving this is the permitted automated direct access of the consumer’s data via the very same interface they are using manually – and this does not just apply to banks, but also insurances, telecoms, social media sites and any other company storing data on behalf of their customers.
What’s more, European data-protection laws also demand proportionality in how data is collected and used. The customer’s consent only covers data strictly necessary to the job with which the he or she has tasked the company. In the US, there has been some concern that screen scraping might give financial-service companies ongoing access, allowing them to harvest a broad range of data from customer accounts. In Europe, this just isn’t possible.
To the contrary, PSD2 stipulates the use of Strong Customer Authentication (SCA) to disable the potential misuse of static login data by requiring a second factor, e.g. a one-time password, to authorise any particular transaction. It also stipulates that licensed fintechs have to properly identify themselves to the banks. The rumour that this would not be possible with direct access is simply not true – fake news! The certificate approach suggested by the RTS can be used equally well for direct or indirect access.
The danger in getting this wrong
Globally, fintech — particularly in the payments industry — is at a crucial stage in its development. E/M-commerce is booming. Volumes are expected to grow exponentially over the next few years. This is driving a rapidly growing demand for innovative online payment and financial products. So far, Europe has been one of the main beneficiaries of this development.
Two key planks of this success have been European fintech’s ability to innovate and its ability to provide a good customer experience. The ban on permitted direct access to customer data puts both at risk. If fintechs must always go through the bank’s back door API, they are essentially beholden to the banks, which could then “control the innovation” – that’s like letting the fox guard the henhouse. If the development of a bank’s API lags behind changes to the way its accounts are structured or the way its online banking works, then EU fintechs — and ultimately consumers — will be at a disadvantage.
At the same time, permitted direct access is the easiest and quickest way for a consumer to get started with a new financial provider. The vast majority of them are using this type of access today – including banks by the way! By forcing the consumer to take a more complicated route to sharing his or her data, the EBA would bring existing competition to a halt and make the customer experience less seamless. This will hurt not just such new providers, but also the conversion rates of many merchants.
The only way to motivate banks providing and sustaining an equally good – or even better – indirect (API) access than what they offer their customers directly is the following: leave the decision about which one to use to the consumer and their chosen fintech. Leaving it to the banks instead and then hoping for a level playing field by regulating and trying to enforce things like “functionality”, “availability” and “performance” levels of APIs will just create endless arguments and disputes between the parties, make the courts even busier and turn lawyers – not consumers – into the real beneficiaries of PSD2.
Driving competition into Financial Services by banning direct access is like promoting electrical cars without allowing them on to public streets. Imagine where telecoms, electricity and railways competition would be today if incumbents had been allowed to keep their access infrastructure exclusively for themselves and lay new wires, powerlines and rail tracks for their competitors to use! Banks can always be a big step ahead if competition is forced to use their (API) back entrance instead of their shiny (online banking) front door.
Some banks will want to provide great APIs to attract many fintechs around them and create a whole ecosystem, similar to what Apple and Google achieved with their app stores. Some others – probably the majority I would guess – will prefer to do nothing and save their money and scarce tech resources for more burning problems. The remaining banks in-between will do the minimum to comply and the maximum to hinder the new competition knocking at their front or back door.
The new competitors will want to use APIs if they are good, because it’s easier than automating the direct access, but they will not want to use them if they are not so good, because it would lead to not so good services to their customers, which by the way are also the customers of that bank – not to be forgotten!
In November 2016, the European Commission established a Financial Technology Task Force, with the aim of helping fintech in the EU reach its full potential. 2017, we were told, was going to be the “year of fintech” in the EU. Potentially hamstringing EU fintechs with an anti-competitive rule is an odd way of showing it.
What should we be doing?
To really protect consumers, the EU needs to help them understand how to choose the right providers when buying financial services and to safeguard against the use of malicious ones. National authorities should rigorously enforce existing laws on data protection and information security, making an example of any company which fails to meet proper standards either in the collection or use of data. This would do what the misguided EBA ban on “screen scraping” aims to do, but cannot, without harming the growing EU fintech sector.
“Permitted automated direct access” should be recognized as one of the most important enablers for innovation and competition in general, and not just in the financial services industry. Therefore, governments, regulators and competition authorities should embrace it and focus on keeping it secure and efficient, rather than throwing it out with the bathwater.
To be fair, the European Parliament recognizes this already judging by a letter they wrote in October 2016. Amazing that the EBA chose to do the opposite, and I can only hope that the parliament will insist and prevail!
Properly nurtured and regulated, European fintech will continue to be a success story: an engine of growth and a job creator, at exactly the time such things are sorely needed. This isn’t the time to put that at risk, particularly not for the sake of excessive legislation that won’t achieve its stated aim.
Oil rises as U.S. vaccine progress raises demand expectations
By Shu Zhang
SINGAPORE (Reuters) – Oil prices rose on Wednesday as signs of progress in the COVID-19 vaccine rollout in the United States, the world’s biggest consumer, raised demand expectations.
U.S. West Texas Intermediate (WTI) crude futures rose 15 cents, or 0.25%, to $59.90 a barrel by 0757 GMT, recovering from three days of losses.
Brent crude futures rose 24 cents, or 0.38%, to $62.94 a barrel after four days of losses.
“Ongoing stimulus measures, as COVID-19 vaccinations speed up, have boosted sentiment,” ANZ analysts wrote in a note.
The U.S. will have enough COVID-19 vaccine for every American adult by the end of May, President Joe Biden said on Tuesday after Merck & Co agreed to make rival Johnson & Johnson’s inoculation.
Futures were down earlier in the day amid uncertainty over how much supply the Organization of the Petroleum Exporting Countries (OPEC) and allies, together called OPEC+, will restore to the market at its Thursday meeting and a big build in U.S. crude inventories
The OPEC+ meeting on Thursday comes at a time when producers are generally positive on the oil market outlook compared with a year ago when they slashed supply to boost prices.
The market widely expects OPEC+ to ease production cuts, which were the deepest ever, by about 1.5 million barrels per day (bpd), with OPEC’s leader, Saudi Arabia, ending its voluntary production cut of 1 million bpd.
Still, an OPEC+ technical committee document reviewed by Reuters called “for cautious optimism,” citing “the underlying uncertainties in the physical markets and macro sentiment, including risks from COVID-19 mutations that are still on the rise”.
Reinforcing concerns of potential oversupply, the American Petroleum Institute industry group reported U.S. crude stocks rose by 7.4 million barrels in the week to Feb. 26, in stark contrast to analysts’ estimates for a draw of 928,000 barrels. [API/S]
However, that build occurred while U.S. refining capacity was shut during the survey week because of cold weather in Texas. Refinery runs fell by 1.75 million bpd, the API data showed.
“The recent selloff may help reinforce Saudi’s cautious stance and delay any production increase,” said Stephen Innes, global market strategist at Axi.
“It’s probably something that could sway the OPEC+ increase more back toward the 500,000 bpd as opposed to the 1.5 million bpd,” he said.
(Reporting by Shu Zhang and Sonali Paul; Editing by Gerry Doyle and Christian Schmollinger)
OPEC oil has advantage over U.S. shale during pandemic recovery
By Jennifer Hiller
(Reuters) – The once-brash U.S. shale industry, which spent profusely in recent years to grab market share, is now focused on preserving cash, putting it at a disadvantage to low-cost OPEC producers as the global economy begins to gear up again.
Prior to the pandemic-induced downturn, OPEC countries led by Saudi Arabia restrained their production, eager to bolster prices to fund national budgets dependent on oil revenue. Shale drillers took advantage, boosting U.S. output to a record 13 million barrels a day.
But attendees of the year’s top energy conference made clear that even with a buoyant, $60-per-barrel oil price, shale will not come roaring back from the Covid-19 pandemic as it did from the 2016 downturn.
By contrast, the Organization of the Petroleum Exporting Countries and allies, known as OPEC+, has more than 7 million barrels of daily oil output sitting in reserve. This positions them to boost production much more easily than shale players for the first time in years.
The concern about free-wheeling shale companies taking advantage of OPEC’s output curbs led to a brief supply war in March 2020. Russia balked at a three-year agreement to extend production cuts, and Saudi Arabia responded by flooding the markets with oil, leading U.S. futures prices to slump to negative-$40 a barrel.
“Let’s face it. OPEC has had a very difficult time managing to accommodate the U.S. shale players and their ability to grow at low prices,” said IHS Markit analyst Raoul LeBlanc, adding that the key debate within OPEC is what oil price is just low enough to avoid a massive U.S. response.
The pandemic destroyed a fifth of global fuel demand, and numerous shale companies declared bankruptcy, while others arranged mergers to offload debt. Frustrated investors sent energy-related stocks slumping throughout 2020.
While shale executives expressed concern about reopening the wells too quickly, OPEC nations are expected to ease supply curbs at their meeting later this week, without having to look over their shoulder at shale.
“The worst thing that could happen is that U.S. producers start growing rapidly again,” said ConocoPhillips Chief Executive Ryan Lance.
The market widely expects OPEC to ease production cuts, which were the deepest ever, by around 1.5 million barrels per day (bpd), with OPEC’s leader, Saudi Arabia, ending its voluntary production cut of 1 million bpd. (Graphic: Pandemic ends U.S. oil output) climb)
At CERAWeek, OPEC vs. shale is often discussed as a showdown between competing interests, but the dynamic of Texas vs. the Middle East is nearly invisible this year. Just one panel discussion in a five-day schedule focused on shale. Neither the Exxon or Chevron CEOs mentioned shale during their talks. Both companies have cut spending in the U.S. Permian Basin.
Crude on Tuesday topped $60 per barrel, up from $44.63 at the start of December, high enough to bolster U.S. producers’ earnings given recent cost cuts.
In the past, rising prices have enticed shale companies to ramp up production even after they promised prudence, and $60 oil would have once prompted companies to rush drilling rigs and frack fleets back to work. That is not happening now.
“They are not taking the bait,” LeBlanc said.
Private companies are likely to increase oilfield activity, but not enough to meaningfully boost U.S. output, said LeBlanc, adding that U.S. spending is likely to remain around $60 billion, flat with 2020, as companies prioritize shareholder returns.
“The severe drop in activity in the U.S. along with the high decline rates of shale and the pressure from investment community to maintain discipline instead of growth means in my view that shale will not get back to where it was in the U.S.,” said Occidental Petroleum CEO Vicki Hollub.
(Reporting by Jennifer Hiller; additional reporting by Laila Kearney and Devika Krishna Kumar; editing by David Gaffen and David Gregorio)
U.S. oil industry lobby weighs support of carbon pricing – source
By Valerie Volcovici
WASHINGTON (Reuters) – The American Petroleum Institute (API) is weighing endorsing a price on carbon emissions, a major shift after long resisting mandatory government climate policies, a source familiar with the decision making said.
The API, the main U.S. oil industry lobby group that includes most of the world’s biggest oil companies, is considering carbon pricing “among other policy solutions to reduce emissions and reach the ambitions of the Paris Agreement,” the source said, confirming a report about the policy shift by the Wall Street Journal.
The group is confronting its previous resistance to regulatory action on climate change amid a shift in industry strategy on the issue and the new U.S. presidency.
European member Total quit the group because of disagreements over API’s climate policies and support for easing drilling regulations and the Biden administration is pursuing a policy agenda that would shift the United States from fossil fuels.
A draft statement of the policy shift reviewed by the Wall Street Journal said the group does not endorse a specific carbon pricing tool such as a tax on carbon emissions or emissions trading scheme. The source said, however, that the group’s State of American Energy report released in January was supportive of a market-based carbon pricing policy.
The API did not comment on whether or when the group would formally endorse a price on carbon but said it has been working for nearly a year on an industry-wide response to climate change.
“Our efforts are focused on supporting a new U.S. contribution to the global Paris agreement,” said API spokeswoman Megan Bloomgren.
Within API, there has been a widening rift between Europe’s top energy companies https://www.reuters.com/article/us-total-api/frances-total-quits-top-u-s-oil-lobby-in-climate-split-idUSKBN29K1LM, which over the past year accelerated plans to cut emissions and build large renewable energy businesses, and their U.S. rivals Exxon Mobil Corp and Chevron Corp that have resisted growing investor pressure to diversify.
Other major industry groups like the U.S Chamber of Commerce and the Business Roundtable https://www.reuters.com/article/usa-business-carbonpricing/u-s-ceo-group-says-it-supports-carbon-pricing-to-fight-climate-change-idUSKBN2672W4, which includes Chevron, over the last year have endorsed market-based carbon pricing.
Chevron said it has engaged those groups and API “to support well-designed carbon pricing.”
“We support economy-wide carbon pricing as the primary policy tool to address climate change, applied across the broadest possible area to maximize environmental and economic efficiency and effectiveness,” Chevron spokesman Sean Comey said in an e-mailed statement.
BP and Shell declined to comment.
(Reporting by Valerie Volcovici; Editing by Chizu Nomiyama and Christian Schmollinger)
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