Preparing for PSD2 and Open Banking

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 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.

Scope

  • 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.

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.

Companies mentioned

Swave

Dyme

MaxMyinterest

Spendific

Digit

Money Box

Acorns

Drive Wealth

Money Hub

Pension Bee

Namu

Iquantifi

Mobiliti

Five Degrees

Nymi

Visa

Sho-card

Personetics

Wallaby

Vouch,

Swave

Dyme

MaxMyinterest

Spendific

Digit

Money Box

Acorns

Drive Wealth

Money Hub

Pension Bee

Namu

Iquantifi

Mobiliti

Five Degrees

Nymi

Visa

Sho-card

Personetics

Wallaby

Vouch,

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 ...

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

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 ...

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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