Some see PSD2 as a force that will consign banks to a behind-the-scenes role. Paul Riseborough, chief commercial officer at Metro Bank,told AltFi in September that banks risk being reduced to “dumb piping”.
Jeroen Broekema, online lender Funding Circle’s lead in the Netherlands, recently told us that PSD2 “has the potential to be a game-changer”, but that its success in the short-term will depend on the willingness of the big banks to engage.
His comments came in the shadow of recent reports that Brussels raided the offices of banks and banking trade groups in Poland and the Netherlands, suspecting them of frustrating the progress of PSD2.
One might imagine that PSD2 is some impending doom from which major the banks cannot escape. But that is not the view of Temenos’ resident PSD2 expert Peter Ryan.
Temenos is a software provider to banks and other financial services firms, helping them to keep pace with a rapidly changing market. It’s the fourth largest software company in Europe, with profits of over $185m and a market capitalisation of more than $5bn. (Clearly, selling technology to banks is big business.)
Ryan believes that PSD2 has the somewhat ironic potential to bring a personal touch back to incumbent banks through bespoke customer solutions. He said that if banks look after their customer bases well, they’ll be able to negotiate advantageous deals on their behalf with large retailers. He argued that banks will have a great deal of bargaining power because of the sheer volume of data they hold on customers.
Of course, PSD2 is about freeing up access to that data for a broad range of service providers, with a view to new-age products being built off the back of it. But there’s no reason that banks couldn’t also benefit from such efforts.
Ryan offered the example of a customer using a personal finance management platform (PFM) to set savings goals. If that PFM is integrated with a bank via API, then the bank wins seamless access to the wants and needs of the customer in question.
What this means from a practical standpoint is that the point at which customers apply for products will cease to be their first interaction with the product provider: instead, the application will become “the end of the journey”, because banks will be able to advertise products proactively, in this scenario using the data amassed by PFMs. “It gets back to the ethos of the bank being a partner through life,” said Ryan.
“If you think about the large banks with APIs as banking platforms, rather than banks in the traditional sense, all these add-ons and APIs could really enhance the product,” he continued. “It could be a really positive move for banks.”
We turn now to the iPhone. Ryan made the point that it is the iPhone, rather than the many apps with which it is compatible, which enjoys the lion’s share of its customers’ loyalty. Banks, too, have an opportunity with PSD2 to become “far more engaged with the customer”.
But the question again comes back to how willingly banks will embrace the scheme. Despite the aforementioned causes for concern, some banks have been proactive in getting out ahead regulatory requirement. HSBC launched a “test and learn” version of its Open Banking solution in September, which will soon allow its 17 million customers to view all of their accounts (HSBC or otherwise) within one app. ING launched a similar service by the name of Yolt in July.
Ryan is confident that some banks, at least, are alive to the possibilities of PSD2. “Within the UK, the CMA 9 were obliged to adopt Open Banking,” he said. “The general feeling is that now that they’ve started doing it, they can see the opportunities.”
He warned that in Europe there is more variation to the enthusiasm with which banks are getting PSD2-ready. But in general the Temenos man sees a shift in attitudes that gives him hope for the future of fintech-bank collaboration.
“There is a change in mood in banks from ‘the fintechs are the enemies, we’re in trouble’, to ‘let’s work together and embrace open banking and the opportunities it presents’.”