New EU directive - PSD2 in 2018!
2018 will be the game year for retail banking. As the EU's PSD2 (Revised Payment Service Directive) is implemented, the banks' monopoly on bank account information and the payment services of their customers will disappear. The new EU directive PSD2 opens the door to any company interested in banking.
In short, PSD2 allows bank customers, both consumers and businesses, to use third-party providers to manage their finances. In the near future, you can use Facebook or Google to pay your bills, transfer P2P and analyze your expenses, and your money will be safely placed in your current bank account. Banks, however, are obliged to provide these third-party providers with access to their customers through open APIs (application program interface). This will allow third parties to create financial services over data and infrastructure of banks.
New directive PSD2 is like a step towards of competition dissapearence
Banks will no longer compete with banks, but all offer financial services. The new PSD2 directive will radically change the value chain of payments, which business models will be profitable, as well as customer expectations. In accordance with the directive, the European Commission seeks to improve innovation, strengthen consumer protection and increase the security of Internet payments and access to bank accounts in the EU and EEA countries. It presents two new types of players for the financial landscape: PISP and AISP. AISP (Account Information Service Provider) are service providers who have access to account information of bank customers. Such services can analyze user spending behavior or add user account information from several banks into one review. PISP (Payment Initiation Service Provider) are service providers that initiate payment on behalf of the user. P2P transfer and bill payment are PISP services that we are likely to see when implementing PSD2.
However, for banks PSD2 creates significant economic problems. It is expected that IT costs will increase due to the new security requirements and the opening of the API. In addition, it is predicted that 9 percent of the revenue from retail payments will be lost to PISP services by 2020. And, since non-banking institutions interact with customers, it may be increasingly difficult for banks to differentiate themselves in the market to provide loans.
This, in addition to the changed customer expectations and increased digitalization (meaning the expansion of IT technologies), it may be due to the fact that today we are seeing how more and more banks are experimenting with their API interfaces. working with fintechs (companies with financial technologies), paying particular attention to customer centering and the creation of innovative laboratories.
As a result, banks can prepare and create the necessary opportunities to achieve competitive advantages for the future financial landscape.
European Union PSD2 is like the end of the monopoly?
The traditional way to think about banking and financial services is to think of banks as the main providers. This can be partially explained by the necessary banking licenses, which makes it difficult for new entrants to enter the market and, in part, low consumer confidence in third parties. However, with the start of the European Union PSD2 directive, this may change, since it will be easier for non-bankers to enter the market with financial services solutions.
The belief that FinTech non-bank companies will play an important role in the future financial landscape has proven itself in the investment markets. The cumulative global investment in financial technology has exceeded ten to two times over the past five years and is estimated to exceed $ 150 billion over the next 3-5 years.
You will learn how the European financial services market will look when PSD2 is implemented and beyond its boundaries by contacting our experts!