PSD2 Market Shift and Opportunities

h2 class="nm-txt sm z-pad m-z-pad"> Market Impact & Considerations

  • Clients desire for innovation, seamless, value-adding experiences and services are not being fully met through traditional banking (Monzo – 1Million-2015, TransferWise-2011-3M - £2Billion EOM, Revolt -3Million-2015)
  • Wide range of competitor organisations poised and ready to take advantage of Open Banking (e.g. Fintechs including Tech Giants like Google, FB, Amazon & Apple, Payment Service Providers like Xero, Sage, Ripple, Banks, etc.) – Cut Costs and Optimize Operations is the core objective.
  • Banks typically lag behind other providers in leveraging customer financial data for customer benefit (Analytics, Authentication, Security, Banking APIs, Cryptocurrency, Lending, & Payments) - Corduro, Rally, Ripple, Plaid, Robinhood, Guesto, OnDeck, Puddle, LadgerX, Kensho, Lendup, Upstart, Shape Security, Jet & PayRange
  • Initial impact on Retail sector, but will move to Corporate
  • Corporate Banks already provide a degree of account aggregation and payment initiation via SWIFT MT940/MT942/MT101 and interface with third parties using existing channels.

Pace and scale of change depends on market innovation, client uptake/propensity to change and competitor response

  • Several players are expected to enter the aggregation space, combining with existing solutions (Larger scale providers such as SAP and Oracle)
  • Simple account aggregation will become a hygiene factor. These players could expand from simple aggregation into more complex offerings and payment solutions.
  • Likely to be concerns from Corporates around data privacy and security, willingness to share data with third parties (banks may have an advantage)
  • A number of banks are ahead of the curve implementing APIs to take advantage of Open Banking (Citibank, Deutsche Bank, HSBC, Santander) and out with solutions

Market Shift - What’s happening since Jan 2018

  • Firms are using Open Banking and, according to the Open Banking Implementation Entity (OBIE), the technology was used 3 million times in July, up from 2 million usages in June – clearly indicating that the number of financial services beginning to engage with API integration is growing dramatically.
  • Innovation from the convergence of technology and Financial Services in the Payment sector is explosive. Usually happens in slow pace backed by industry-wide schemes and was controlled by few selected players.
  • Cambridge Analytica Scandal was a tip of the iceberg but GDPR and increased ICO’s pressure confirm the security and assure consumers on possible data breach.
  • PWC predicts 71 percent of SME’s and 64 Percent of population will adopt open banking by 2022

PSD2 Opportunities

  • Small Business – Faster and fairer with tailored offer to their specific needs from lenders – Derived through Analytics
  • Retail – Providing power to PSU’s to manage and control their finance from one place by collating analysing their Income Vs Spending. Invest the surplus through single clicks.
  • Offers has to be more customer centric as the offering will be highly competitive and disruptive. Keep cost saving and efficiency in operations and as a core objective to pass the benefits to customers.
  • Challenge for established players – Providing greater customer experience meaning total revamp on their technology platform and offering to face FinTechs and Challenger Banks.
  • PWC predicts £7.2 Billion revenue opportunity by 2022. Embrace OB as an opportunity rather a threat.
  • Banks can wait and observe the market until mid of 2019 and focus on which they want to strategically focus considering their structure and limitations. Phase 1 has to be fully compliant then focus on Phase 2 and Phase 2 to provide aggregation service.

PSD2 – FCA Deadline – Bank’s Compliance Requirement

March 2019

Qualifying banks must show their capability of their system readiness having Sandbox and Developer Portal.

September 2019

Build API Capability, SCA, API Bridging with Core Banking for TPP’s to access it for AISP & PISP Services

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