Banks wise to view PSD2 as opportunity

The following is a guest post courtesy of Conor Ogle, the vice president of business consulting at Sapient Global Markets.

Conor Ogle

Conor Ogle

The Second Payment Services Directive (PSD2) is a fundamental piece of payments-related legislation in Europe and requires payment service providers to make a significant number of changes to existing operations by January 13, 2018. It aims to increase competition through a regulatory framework that encourages the emergence of new players, such as fintech players and challenger banks, and the development of innovative mobile and internet payment services in Europe.

The EBA responses are interesting but banks must accept we are looking at the absolute mandatory minimum of what they’re expected to deliver under PSD2.

 A bank’s homepage is under ongoing assault from many sources. They can only survive this by offering services their customers truly value. Whether or not screen scraping was going to be permitted, banks must take swift action and consider which propositions they should be providing themselves. Rather than treating alternate providers as threats to their existing business models, they would better serve their customers and shareholders by evaluating which of the propositions could provide real value to their customers.
An API-based economy transfers power to the end user. In this model, banks could find themselves reduced to “dumb pipes” at best, with consumers naturally favouring customer-centric propositions with friction-free onboarding and enhanced data-driven services. Despite all these obvious signs, some banks will fail to see PSD2 as anything more than a regulatory response project. They may squander the chance to fundamentally reset their value propositions, ignoring this opportunity to reconsider the very purpose and nature of their brands through the lens of their customer.
Consider the recent customer satisfaction results at the British Bank Awards that served to highlight, yet again, the increasing gap between what banks are managing to deliver and what their customers actually consider valuable.
Banks are right to consider this period their existential crisis. Whilst the long term landscape is unclear, we’re set for further disintermediation and then a colossal re-assembly of the value chain.