Are you a survivor or thriver?
“Open Banking is about making everything for sale. It provides a new way to increase digital revenue for the banks that are willing to think differently … Open Banks and FinTechs will continue to erode margins and customer relationships for those banks that don’t.”
– Kristin Moyer, Gartner, Research Vice President & Distinguished Analyst
Setting the scene
Every day there is a new article that discusses the sea change disrupting the banking industry. This change, they say, will fundamentally disrupt the financial services value chain for customers, intermediaries, and incumbents alike. There is no avoiding the signs.
Across the world, there are pressures, both regulatory and customer-led. And they are opening up the market to new entrants and disrupting what and how customers buy. In Europe specifically, the Revised Payment Services Directive (PSD2) is set to unleash a transformation in how financial services organizations view themselves and each other.
This isn’t unique to Europe –
in the United States, aggregators such as Mint.com have already dis-intermediated banks and now own the ‘last mile’ of the customer banking relationship, disrupting traditional players.
The success of Mint.com in the US highlights the appetite of consumers for account aggregation, or Account Information Service Providers (AISPs), in PSD2 language. Starting in 2006, it now says its customer base for its aggregation and personal finance services is over 10 million strong. Traditional banks are already feeling the competition with a number of high profile temporary bans on access to data from such services. Under PSD2, in Europe, this ban would not be legal; it’s only a matter of time before other global markets follow this route.
PSD2, through both intermediating and dis-intermediating the bank, provides a legislative mandate for more open data and an increased open data interchange between financial services organizations. By January 2018, European banks must provide access to customer information (e.g. account balances and details) to AISPs, introducing another entity to the customer relationship. In addition, banks must expose customer information and payments services to Payment Service Providers (PSPs), dis-intermediating the traditional payments model. Most importantly, banks and financial services institutions may also take on the role of AISPs and PSPs themselves. This will all be enabled through the effective use of APIs; setting the scene for the API economy to play a disruptive role in the future of financial services.
This need to drive a more open set of business practices will, in turn, accelerate the adoption of Open Banking.
How organizations respond to this change will shape their future. Those that underestimate these waves of change may be survivors; but those who treat Open Banking as an opportunity to re-define and prioritize what value they add in the value chain will be thrivers, and will win, both short- and long-term.
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