2018 will see the implementation of the much-hyped PSD2 directive. With banks losing their monopoly on customers account information and payment services, Open Banking will become a game-changer for personal banking customers throughout the UK.
In a dramatic change to the way customers are currently banking online, PSD2 will enable both personal and business banking customers to use third-party providers to manage their finances. This will mean a far wider range of services can be undertaken from an app on your mobile device, rendering traditional online banking services pretty much obsolete.
While this is a definite step up for consumers, banks on the other hand, may well be feeling nervous as the deadline approaches. They will now be legally obligated to provide third-party providers with access to their customers account details through open API’s (application program interfaces).
Banks To Step In Line From 2018
Come the implementation of PSD2, banks will be facing challenges previously unseen in the financial industry. Not only will they be competing against each other to win customer loyalty, but now they face competition in the form of third-party providers who are not established financial institutions. PSD2 will fundamentally change the way banks see the payments value chain, identify which business models are profitable and manage their customers own expectations.
The PSD2 directive is aimed to improve innovation, usability and to reinforce consumer protection in terms of internet payments and account access within both the EU and the EEA. Much more than just offering simple online banking transactions, this kind of new technology could realistically see customers being able to undertake a wide variety of transactions and financial analysis at the touch of a button.
Two new types of players will make their presence felt within the finical services industry. AISP (Account Information Service Providers) and PISP (Payment Initiation Service Providers) will now be able to access, analyse and initiate transactions on behalf of the customer, leaving the banks a little left behind.
Worse news for banks comes in the form of the increased expenses required to implement the changes enforced by the directive. IT costs are expected to increase throughout the industry, whilst retail payment revenues could fall as a result of the introduction of PISP providers. Banks may also lose their ability to remain competitive when it comes to more profitable, interest bearing products like mortgages and loans.
From a customer point of view, PSD2 will open up a wealth of new ways to pay. Imagine paying your bills via Facebook or Google, or being able to transfer between banks just by using an app on your phone. Prevent your account going overdrawn, move money at the touch of a button or even compare fees and interest accrued when purchasing the bigger things in life like a new car or buying your first home.
PSD2 will certainly change the way consumers access and manager their own personal finances forever. It will also see a dramatic reassessment of how traditional banks hold on to their own customer’s details, effectively monopolising the amount of options available to both personal and business banking in the UK.
So, here’s to 2018 – a year that looks set to see a world new world of opportunities for banking in the UK. The opportunities and the risks are significant, but there is certainly no prizes for not being an early adopter of the analytcis and data decisioning that PSD2 could bring.
Steven Preston, Director, Elanev