PSD2 (Revised Payment Service Directive) is going to shake up the retail banking industry in 2018. As the new regulation is implemented in a month today (January 13th 2018), banks’ monopoly on their customer’s account information and payment services will disappear. The new EU directive opens the door to any company interested in taking on the traditional banking system.
Banks need to do more than the bare minimum needed to comply with PSD2, or they’ll have no way of standing out from the crowd.
Danny Healy, financial technology evangelist at MuleSoft believes banks must consider how they can create additional APIs to build newer and better services; pointing to Barclays, HSBC and RBS as examples of banks that are already ahead in exploring this area.
“With just a month remaining until PSD2 comes into effect on January 13th, banks across Europe are ensuring they’re ready to comply. However, for banks to take full advantage of PSD2, they need to create APIs that go beyond compliance and offer wider innovative capabilities. For example, rather than serving as a place to simply check financial balances, banks should create personalised services tailored to customers’ needs.”
Open APIs will allow ‘non-banks’ to enter the financial market without the heavy compliance and infrastructure, which traditional banks are required to maintain.
“The early innovators,” continued Healy, “will have the best chances of emerging as market leaders in the open banking world, as basic financial services become commoditised. We’ve already seen a number of banks—such as Barclays, HSBC and RBS—drive innovation through APIs. Barclays, in fact, is using hackathons to experiment with APIs and build new financial services solutions. The key for banks to move at speed to match pace with fintech startups is ensuring the APIs they create are discoverable and reusable in their application network.”
>See also: PSD2: 6 months left for rapid banking change
The financial market will be open to new faces, with new ideas about how to shape the banking industry moving forward, with a specific focus on the consumer experience.
Pini Yakuel, CEO of customer relationship experts Optimove, comments: “The disruption coming with the Open Banking initiative will have a marked impact on customer engagement. Customers will be able to compare the value that each financial services company offers them quickly and easily. Banks will have a real fight on their hands to retain a generation of smartphone-empowered, brand-agnostic consumers.”