Next year the banking industry will undergo great change, as PSD2 regulations are introduced across Europe and Open Banking Standards are implemented in the UK, to encourage greater competition.
This means financial institutions (FIs) will be required to adopt open banking, by allowing third parties access to customer data in the form of secure APIs.
While many banks are focusing on the need to comply and meet the minimum requirements of Open Banking Standards and PSD2 regulations, they are missing the great opportunities these changes will present.
Not only do the regulations offer the chance to drive new ways of banking for customers, it also gives banks the chance to look at how they can transform their services.
Both regulations provide a big opportunity for FIs to do things differently and serve customers in new innovative ways.
A new way of thinking
With the new Open Banking and PSD2 regulations, banks have the opportunity to move from a simple service provider to a financial partner for customers. Consumers now expect access to their banking services wherever and whenever they want, on a channel that suits them best. Open Banking and PSD2 offer banks a chance to meet these demands and identify areas where they can add value to services and adopt a more customer-focused strategy.
For example, banks already have access to huge amounts of data. These insights are vital to them when they are looking to validate and align new offerings and initiatives that tap into individual consumer desires. Of course, banks must also make sure it is clear to customers that data is being used and where it is being shared.
Collaboration is the key
As well as sharing data, Open Banking and PSD2 enable the industry to be more innovative and collaborative. Banks and fintech providers can partner with each other to offer innovative new services. Larger banks need to become more open to sharing data and insights with fintech companies and look at the idea of implementing new technologies that will make them more agile. Fintech companies are leading the market with digital innovations and FIs can learn from this.
At the same time, banks can provide direction on strategy and the regulatory market, which many fintech service providers may not be used to. With the arrival of Open Banking and PSD2, both regulations will allow the collaborative process to be even easier and open up the market to provide banking services that customers will want to use on a daily basis.
With the move to open banking, including the PSD2 rule, a strategy that fully utilises data, collaboration and digital solutions is needed for a true banking revolution. One UK challenger, Tandem is already doing this. The Tandem app collects data from other FIs for its customers’ accounts, analyses their spending and suggests ways to save money, such as changing utility supplier. Banks should keep a similar approach like this in mind, when looking at where they can add value to their customer’s lives.
Embrace Open Banking and PSD2
The new Open Banking and PSD2 regulations will bring disruption. However, in this complex environment, whether technical or legal, banks are not alone in this process. By looking at new ways to view their business strategy and partnering with companies who can help them achieve the best for customers, they can transform their services. If the industry as a whole can embrace the change, this will create a huge positive shift in the market. Banks who view the new regulations as an opportunity will be able to position themselves as a financial partner to customers, providing a completely new banking experience that is in tune with customer’s everyday banking needs.
Andrew Steadman is vice president of product management and marketing at Fiserv.