The Payments Services Directive 2 (PSD2) comes into force from tomorrow 13 Jan 2018, with the exception of the security measures which will not become applicable until 18 months later (i.e. Sept 2019) resulting a in new payments ecosystem. Under the revised Directive banks in Europe will need to make customer data available in a secure manner, and eventually give third-parties access to their customers' accounts. This new ecosystem will comprise not only financial institutions but also retailers, high tech companies, gaming, gambling, social media and potentially any firm that involves financial information or transactions.
The introduction of PSD2 is meant to create a level playing field for new entrants and traditional market players, offering more opportunities for competition and innovative payment services. Under the revised Directive banks in Europe will need to make customer data available in a secure manner, and eventually give third-parties access to their customer’s accounts. PSD2 is a testament to the newly unfolding world of open banking where FinTech companies, merchants and even telco’s and other utility providers, can change the payments landscape completely.
“It’s clear that banks, including in Ireland, need to perform a rigorous self-assessment as they transition to the world of open banking."
*Where the bank facilitates the business of others by acting as an intermediary i.e. acts for third parties and their customers
Just half (50%) of the European respondents aspire their bank to be a platform aggregator at some point in the future, while all Irish banks surveyed aspire towards the Platform model and full open banking offering third parties to build up new services using individual bank data. Such a Platform model would facilitate the business of others by acting as an intermediary. It would mean developing an open platform that allows partners to integrate their products and services into the bank’s offering, while generating new products and services based on the bank’s (API). PSD2 API examples include checking available funds, account enquiries and credit transfers.
David Stapleton, Consulting Director, PwC Ireland, added: “Any bank that could achieve this would be a powerful operator. However, the reality is that only a handful of large banks could reasonably expect to build a truly powerful partner ecosystem. In fact, we doubt that many third parties will be willing to connect to multiple banks as long as there is no common API standard across Europe. It’s clear that banks need to perform a rigorous self-assessment as they transition to the world of open banking, including their market positioning and competitive strengths.”
As part of the report, PwC identified several best practices that banks should follow to ensure they address PSD2 effectively and efficiently. Perhaps the most important finding is that banks should ensure their top management is part of the strategic response to open banking. Currently, strategic considerations are oftentimes a by-product of a PSD2 compliance project managed by IT and operations. Given the far-reaching impact PSD2 will have, banks that take this approach will miss the opportunity to become powerful operators in the new world of open banking.
Notes to editor
About the survey
The research into PSD2 readiness was undertaken by PwC and Strategy in Autumn 2017. To capture the industry perspective, senior representatives of 39 leading banks in eighteen countries (Ireland, Italy, Denmark, UK, France, Slovakia, Czech Republic, Belgium, Finland, Luxembourg, Poland, Switzerland, Spain, Portugal, Germany, Netherlands, Austria and Norway) were interviewed. The findings were analysed and evaluated by leading thinkers of the global PwC PSD2 centre of excellence, which combines experts with regulatory, technology and strategy backgrounds.
Download the report here: www.pwc.com/psd2-readiness
PwC launches PSD2 hub
The adoption of the Directive on Payment Services (PSD2) has set the stage for open banking, providing standardised access to Irish customer data and banking infrastructure. PSD2 will lower the barriers for entry to third-party providers and FinTechs, and stimulate the development of new business models. Adapting to the new requirements is taking a lot investment.
To assist banks in the adoption of PSD2, PwC has created a European Centre of Excellence that helps companies to turn PSD2 into an opportunity on a national as well as cross-European level. For more information, please visit: www.pwc.com/psd2
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