The new service directive PSD 2 is proof that regulations can also create huge opportunities for banks.
In January 2018, the new service directive PSD 2 will become effective. This regulation change means that by law, banks will have to open their books to third party providers in order to create a more level playing field and encourage innovation.
To get an idea of what the future will look like after the PSD 2 takes effect, Kate Pohl, Head of Payments Innovation for ING Wholesale Banking Germany, Austria, and Czech Republic, led a panel at the Future Cash Management event in Mannheim. The panel, entitled Regulation as a Driver of Innovation and Digitisation, featured four experts from the European Banking Association, Arvato, Traxpay and PPRO.
Good news for clients
The particularity of PSD 2 is that it aims to create more opportunities for banks and third party providers, instead of restricting them. This means that banks need to turn their attention to the customer experience and especially APIs, which will support these changes and give easier access to value added services such as loyalty, insurance or instalment buying. “The good news for both retail and corporate customers is that they will have more choices concerning how they make payments and receive banking information,” says Kate Pohl, Head of Payments Innovation for ING Wholesale Banking Germany, Austria and Czech Republic.
“The clients will definitely benefit, and everyone will win in their own respect,” said Thomas Egner of the European Banking Association. The main way that clients will benefit is that they will be offered products that were developed by Fintechs or technology companies, but that also offer the same amount of trust and reliability that banks offer. “Banks have developed trust with clients, and they should be asking themselves what they can do with this trust. They will find themselves in a completely different competition with other banks,” continued Egner.
What’s to come
B2B Fintechs will play a key role in developing new programmes, especially if they partner with banks. ING has already partnered with over 100 Fintechs in preparation for PSD 2. However, it is also very possible that Tech Giants such as Google, Facebook, and Amazon will enter the payments game as well. They offer high levels of security, globality and very deep pockets.
The panelists are certain that this will not be the last regulation change. “One thing is for sure, there will be a PSD 3,” said Markus Rupprecht of Traxpay. The banks will have to learn as they go after PSD 2 becomes effective, because it will most likely require improvement. That was also the case after PSD 1 took effect. Some topics that might present challenges include cyber security and usability. “In 2 years I’m expecting a lot of chaos, in 3 years it will be becoming stabilized slowly, and in 5 years there will be many new products,” said Christian van Hammel of PPRO Group.
The applications and programmes that will emerge after PSD 2 will also be much different, as the customer experience becomes increasingly important. “There is a big difference within banks regarding their perspective,” said Markus Rupprecht. “They have to think bigger and more creatively.” One way to do this may be to incorporate Network Economy thinking into the banking mentality. “As a consumer, I don’t want to use 20 apps for 20 different things. I want to have one app which does everything. That is the dream world,” said Christian von Hammel-Bonten. Friedrich Kalthoff from Arvato added, “There is such a big opportunity for banks to position themselves in a new way.”