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Seizing the PSD2 opportunity?

12 January 2017

On 11th February 2016, Odgers Interim held their first PSD2 (Payment Services Directive 2) related breakfast; precisely 701 days before companies are expected to start their implementation. As the year has progressed, there have been an increased number of forums, webinars, seminars and blogs, so the excitement (tongue-in-cheek) is building, and there really isn’t much hiding from the fact that this is going to happen. For those of you that have been living unaware of the goings on within financial services world, let me first explain what PSD2 is and how it will impact our lives. I do believe in the next 5 years, if we get this right, we will have a very different financial services landscape.

PSD2 is an EU directive (regardless of Brexit, it is happening) where banks will allow third parties access to customers online accounts in a secured way. Imagine the possibilities that this can bring to us all; as consumers and businesses. This is a game changer.

PSD2 will open up the way for banks and non-banks to build open APIs (Application Programming Interface) by gaining access to our data. What makes this really interesting is that it will allow non-banks to enter the financial market without having the heavy compliance and infrastructure that currently our banks are required to maintain. So, it raises the question; does a bank innovate or stagnate?

The words that come to my mind when thinking about PSD2 are ‘open’, ‘positively challenging’ and ‘game changing’. However, there are questions that need to be answered; and soon. Does a banking institute engage with the customer and provide new services? Or does a bank do just enough to comply? Does a bank become a utility? And perhaps most importantly, do all the institutions affected by PSD2 have the right talent to make this happen?

In 2016, we held six payments events; two of which were specifically related to PSD2. These breakfast events saw a wide range of individuals from Fintechs, banks and a handful of challengers, discussing the challenges and opportunities ahead. It was clear from these events, that some organisations have had a lot more time to think about the opportunities that PSD2 will bring, while others were battling the ongoing internal education of the possibilities ahead. Reflecting on the breakfasts, it does seem however, that most institutions are way ahead of the curve and embracing the change ahead and do in fact see beyond the compliance and regulatory program. If we look across Europe we have seen BBVA, Fidor Bank, Monzo, Barclays and RBS (to name a few…), already offering APIs to third party developers. 

At the time of publishing this post, we have 367 days (January 13th 2018) until PSD2 comes into force.  I am confident that most companies are well into this program, however now should be a time to review it by asking the following questions; is your PSD2 team still focused on the end game? Is your PSD2 strategy still fit for purpose? Will you be the market leader or a market follower? Do you know your customer segment? Are you promoting this internally and does your board fully understand the opportunity? Have you thought and re-thought again about the possibilities of what this can do for your organisation?

Odgers Interim can assist any organisation with Executives that can help you answer the above questions, whether it is across Technology, Security, Product Development, Regulatory and Compliance, Finance and Legal, our track record speaks for itself. On Thursday 2nd March 2017, we will host our third PSD2-specific breakfast and I welcome all institutions to attend and discuss this new reality further. 

Tim Muzio, Consultant

Tim Muzio is a Consultant within the Financial Services Practice at Odgers Interim


Categories: Financial Services

Comments

Tanzin at 17/01/2017 21:35 said:

This is such an informative article. It inspires me to write my report (university assignment) on this topic. Thank you.

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