Payments Services Directive 2 (PSD2) comes into force in January 2018. It represents the biggest regulatory shakeup in recent memory and while it has made some organizations anxious, most are excited at the enormous opportunity it presents – especially to Fintechs.
We have seen three distinct types of response from bankers. Some are burying their heads in the sand, apparently in a state of disbelief that regulators are forcing PSD2 upon them. Others are preparing to do the bare minimum required to comply. More and more, though, are getting on board and embracing the challenge head on. They’re excited and they’re proactively preparing.
The new regulatory statuses of Account Information Service Provider (AISP) and Payment Initiation Service Provider (PISP) offer significant opportunities to build a more streamlined and integrated workflow for your customer. Although, liaising with available banking APIs regarding function, process of integration and cost now is crucial to inform your approach.
Your challenge lies in how to tap into the frustration that customers feel with their bank and successfully demonstrate that their payments and data will be managed to the highest standards of security and implementation on your user-friendly application.
For a customer, trusting a startup PISP or AISP to access and manage their bank accounts will be a tall order. Like many new concepts that involve transactions, it will be a gradual process. Nevertheless, we expect to see some truly innovative products coming out of the Fintech community.
PSD2 could end up becoming the banking sector’s ‘iPhone moment,’ fundamentally transforming the financial services landscape.
Collaboration and sharing of services will become the norm. Network marketplaces will emerge, where consumers go to buy and manage their financial services products. These marketplaces will be akin to Android or iOS with Fintechs and Banks being the new App vendors.
Banks will need to consider their strategies very carefully or run the risk of becoming marginalized as custodians and wholesale providers of services such as debt, credit and liquidity (which may actually be palatable for some).
The GAFAs (Google, Apple, Facebook and Amazon) are also waiting in the wings and could emerge as winners. All four tech giants are extremely adept at monetizing data in return for subsidized access to their core products and services. The unprecedented ability to access customer banking data that PSD2 brings will enable the GAFAs, playing to their strengths and dramatically disrupting financial services.
Banking regulation is increasingly onerous, capital-intensive and restrictive. Customer expectations are constantly increasing. If an outcome of PSD2 is that banks become wholesalers to an even more emergent Fintech community, they will spend less time servicing end-customers, and Fintechs on the periphery will start to control the customer service layer.
Whilst this will clearly require widespread change in business models for many, if this leads to reduced overhead for Banks and better products and services for the customer, is it such a bad thing?