With the go-live date for PSD2 nearly upon us, we hear from one bank why the regulation will be hugely positive for the industry.
The European Commission’s Payment Service Direct 2 (PSD2) goes live on the 13th January ushering in a new era for financial services on the continent. Brought in to replace the original Payment Service Directive (PSD), PSD2 aims to create a more integrated, competitive, fair, cheaper and efficient European payments market.
But PSD2 will revolutionise more than just payments. The Access to Account rule, whereby customers can allow third-party Account Information Service Providers (AISPs) and Payment Initiation Service Providers (PISPs) to access their bank account data through open APIs, will allow non-bank entrants to seamlessly offer a range of innovative new services to individuals and businesses.
A survey last year by PwC showed that banks have mixed feelings about PSD2. Many see it as just an exercise in compliance and a driver of cost rather than an opportunity.
Some banks are also concerned that PSD2 and the Access to Account rule potentially poses a threat to incumbent banks that may see them lose parts of the customer relationships and, in some cases, revenue streams.
However, other banks are seeing PSD2 as an opportunity to boost the products and services they offer customers, potentially driving customer loyalty and creating new revenue streams. The PwC survey found that 44% of banks planned to provide an open bank offering in the next five years. Moreover, 64% said they intended to integrate foreign products or functionalities into their own digital offering.
One bank that has been especially bullish around the opportunities presented by PSD2 is Nordea. Gunnar Berger, its Head of Open Banking, says that the bank is taking an active approach to finding as many business opportunities as possible.
“Nordea sees PSD2 and Open Banking as an opportunity to offer better services for our customers and to become more agile by partnering up,” says Berger. “By sharing the development load, we can bring innovative services to market faster.” He believes many banks will follow the same approach and will work to leverage partnerships with future service providers. “Those who lag in this area are missing a big opportunity.”
For corporates, Berger believes that the initial wave of innovation will come through improved account aggregation for corporates. “This will enable treasurers to receive consolidated real-time data on their liquidity situation in a multi-bank environment,” he explains. “The only issue will be if banks are not forthcoming in sharing their data through open APIs.”
Down the line, Berger sees a wealth of innovation happening. “PSD2 definitely creates opportunities for corporate treasurers,” he says. One of the biggest benefits will come from the expected increase in APIs. With powerful banking APIs, treasurers can move away from batch-oriented solutions to real-time information. “This will allow corporates to develop more efficient processes and data-driven decision making. With APIs, banks and their partners can also offer customised solutions, with technology components combined in a way that partner banks, corporates or third parties find meaningful.”
A seismic shift
PSD2, along with changing customer behaviour and general technological developments, will have a big impact on the banking industry across Europe, leading to increased competition, says Berger. “We expect that PSD2 will boost innovation and the creation of new services by or in collaboration with third parties. This will lead to the emergence of a new payments ecosystem.”