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Preparing for PSD2 and Open Banking

Published: May 26, 2016 | Pages: 29 | Publisher: Verdict Financial | Industry: Banking | Report Format: Electronic (PDF)

Summary

The EUs Directive on Payment Services 2 (PSD2) will accelerate the fragmentation of Europes retail banking industry following the global financial crisis. The opportunities brought about by PSD2 will energize 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 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

- 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. 
- Consumers show a strong preference for their bank to provide account aggregation services.
- 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.

Synopsis

Verdict Financials Preparing for PSD2 and Open Banking report offers insight into the changing regulatory structure, new competition, and how banks should position themselves in the new market environment.

It offers:

- Insight into consumer preferences on account aggregation using our 2015 Retail Banking Insight Survey.
- SWOT Analysis on PSD2 and open banking.
- Guidance as to how banks can shape their propositions leveraging third-party providers.

Reasons to Buy

- 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.
 Table of Contents

EXECUTIVE SUMMARY
PSD2 will bring more choice to consumers, but will force banks to reconsider their business models
Key findings
Critical success factors

AIMS AND PURPOSE OF PSD2
PSD2 will empower consumers and spur competition
Key elements of PSD2
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
Security, use of data, and liability
Consumer concerns over the security of account aggregation must not be ignored

A STRATEGIC APPROACH TO PSD2 AND BEYOND
SWOT analysis
Fintech networks are a key strength
APIs are not simply technical solutions, but also business products
PSD2 will undermine customer loyalty
Strategic options

A TACTICAL APPROACH TO PSD2 COMPLIANCE AND OPEN BANKING
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 FUTURE OF OPEN BANKING
The opportunity to collaborate and partner is a force multiplier for banks
Value-added banking of the future

CONCLUSION
Key takeaways
Fintech solutions
Verdict Financial's FinTrack product shows how banks can integrate value-added products and services into their offerings

APPENDIX
Abbreviations and acronyms
Methodology
Bibliography
Further reading
About Verdict Financial
Disclaimer
List of Tables

Table 1: What PSD2 means for banks: SWOT analysis
Table 2: Fintech solutions covered in our monthly FinTrack publication 


List of Figures

Figure 1: Consumers want tools to help them manage their finances
Figure 2: Consumer attitudes towards account aggregation
Figure 3: API program overview
Figure 4: Tactical steps required for open banking
Figure 5: Verdict Financial's Megatrends framework
Figure 6: John's Megatrend profile

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