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Preparing for PSD2 & Open Banking: Forthcoming regulation and technology pose serious challenges for banks

Preparing for PSD2 & Open Banking: Forthcoming regulation and technology pose serious challenges for banks


The EU’s Directive on Payment Services 2 (PSD2) will accelerate the fragmentation of Europe’s retail banking industry following the global financial crisis. The opportunities brought about by PSD2 will energize those banks with strong brand awareness and advanced digital offerings into pushing the boundaries of open banking. Increased competition from card issuers and non-bank third-party providers will prompt the steady mid-cap players to fundamentally evaluate their strategies. Banks that are competing on price may see a future in collaborating with third parties, but in doing so will relinquish control over their customer relationships. Whichever path is chosen, the opportunity to offer, create, or co-create new products and services much more quickly is a positive change for the industry.

Key Findings

Understand the impact of PSD2 on retail banking.
Identify strengths, weaknesses, opportunities, and threats posed by PSD2 and open banking.
Action key tactical steps to ensure compliance with PSD2 regulation.
Envisage how banks can provide value-added products and services in an open banking environment.

Reasons To Buy

What is PSD2?
How will it usher in a new buyer-driven payment model & increase competition?
How do banks need to react to changing legislation?

Key Highlights

Banks must ultimately view PSD2 as a business model change, and not simply a compliance issue. PSD2 fundamentally rebalances control over customer data in favor of the consumer.
PSD2 has the potential to undermine customer loyalty by distancing banks from their customers. The capping of interchange fees will force card issuers to push aggressively into the personal loans market.
Many banks will be in a position to offer additional apps over and above what is required by PSD2. Banks with an established presence in fintech through incubators and accelerators will be in a stronger position to capitalize upon the opportunities brought about by PSD2.

PSD to usher in a new buyer-driven payment model & increase competition
PISPS will bring value-added services to consumers
PISPs could meet consumer needs for money management tools
PISPs will challenge banks’ “front-of-wallet” position
AISPs can boost customer engagement, but also customer acquisition
Consumers still trust banks to look after their money
Becoming an AISP will offer a significant competitive advantage
Consumer concerns over the security of account aggregation must not be ignored
A Strategic Approach to PSD and Beyond
Fintech networks are a key strength
APIs are not simply technical solutions, but also business products
PSD will undermine customer loyalty
Strategic options split into three main models
A Tactical Approach to PSD Compliance and Open Banking
API program consists of several distinct stages
Banks need a plan of action
The first priority is to set up a framework
Create an API strategy
Design an API production process
Market, network, test, and consume
Prepare for delivery service support and optimization monitoring
The market banks compete in is about to change radically and they will need to look positively towards becoming facilitators
Further Reading
Ask the analyst
About MarketLine
List of Figures
Figure 1: Consumers want tools to help them manage their finances
Figure 2: Consumer attitudes towards account aggregation
Figure 3: What PSD2 means for banks: SWOT analysis
Figure 4: API program overview
Figure 5: Tactical steps required for open banking

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