Open Banking has changed the game—building investor trust and driving a surge of funding into fintech, especially for PayTechs.

Regulations are often seen as barriers that increase entry costs and slow innovation, especially for small businesses. However, in Europe’s fintech sector, the reality has been different. Since its implementation, fintechs have gained significantly more capital from investors. This access to funding has helped startups enter the market and scale more quickly. Between 2015 and 2023, fintech funding in Europe grew by 13% annually, reaching $5.6 billion—outpacing regions where open banking isn’t mandated, and giving PSD2-licensed companies a clear advantage. ¹

Introduced in 2018, PSD2 transformed the financial market by allowing third-party providers (TPPs) to access consumer banking data, opening up competition in the industry. This access, combined with Europe’s “passporting” system, allows companies licensed in one EEA country to operate across borders without additional licenses. This regulatory framework gave Europe a clear advantage over regions like the U.S., where data-sharing partnerships are mostly restricted to dominant players. The impact of PSD2 became evident shortly after its 2016 announcement, as early-stage VC funding rounds surged, attracting a broader pool of investors. As a result, over 400 non-bank providers have emerged in the EU, and smaller fintechs have consistently attracted increased funding.

The structured regulatory framework in Europe continues to provide a competitive advantage, especially as it moves towards new initiatives like PSD3 and the Financial Data Access Regulation (FiDA). With each new proposal, Europe is setting the path for Open Finance—a future where financial data from all sectors, not just payments, is securely shared and accessible. Open banking has changed the game by leveling the playing field for smaller fintechs to compete with established institutions, building investor trust and driving a surge of funding into the sector.

1. Data supporting regional comparisons exclude any potential influences and focus solely on the impact of PSD2 following its implementation. I will include data in upcoming posts. ↩︎