As of January 13, all European banks, willingly or otherwise, entered the open banking space. PSD2 has officially become applicable. While the grace period for total compliance still stands, this regulation, which has loomed large over banks, is here to stay. The introduction of PSD2 will make 2018 an interesting year, as we find out how banks learn to live with this new reality.
Along with the need to comply, the format for competing has now changed significantly, with open APIs and platformization set to become the norm. In response to this, banks must make PSD2 work to their advantage, honing their collaboration skills and finding clever ways to forge good customer relationships. Key to survival in an open banking world will be differentiation. It’s time to find new ways to stand out in a market where noise from the competition just got much louder.
The customer has stolen the show
Key to staying relevant at a time when many FS brands are seemingly under threat will be clever system design. The customer has been placed at the forefront of any efforts to create or modify everything from a seemingly innocuous bank-end system, to a public interface.
One could argue that right at the forefront is where the customer should always have been, but having grown up with product-focussed legacy systems, banks for the most part will have to adapt. The size of a bank, it’s impressive history, and its huge customer base are less relevant today. What counts is how well things work for customers. How can they be facilitated in their financial lives? All of that begins with design.
Back-end processes, system architecture, interfaces, and pretty much everything will have to be designed (or redesigned) from this customer-centric perspective. It does not matter what investments have gone before and whether it makes more financial sense to build on previous implementations. Success will be measured in the final result for the end user. The digital interface has become crucial – if customer journeys are smart and streamlined, clients will think twice before leaving. And leaving is easier than it ever has been.
In order to make the interface as customer friendly as we once expected our branch teller to be, relevant technologies must be incorporated throughout. There is no longer any room for friction in the customer experience. Fast processes, quick approvals, extensive choice and real-time results are now everyday things – and banks must deliver.
Banks should also factor in new design components when constructing or modifying their systems. Connecting to new or up-and-coming technologies will become commonplace rather than innovative. As a result, any design that does not accommodate tools like Blockchain or biometrics simply won’t work in the long-term. Without the infusion of new technology, a bank’s offering will rapidly become outdated and the dreaded prospect of complete disintermediation gets closer.
Design does not stop at the technological side of things. Strategy design is set to change shape dramatically. Operating in an open marketplace calls for a different approach and the integration of new parties. Collaboration is key. If, for example, a retail banking advice platform wants to connect to the bank via open APIs, there must be a plan for how to handle this properly.
The bank has to share information on its customers, but how can it do so in a way that maximizes the opportunities without killing the brand? Somewhere between becoming a faceless utility or an everyday bank there is a place where banks proactively let PSD2 drive their open banking success. That place is today’s destination of choice.
Data – to feed the machine
The handling of data may also need to be overhauled as this is a key ingredient that sustains the new way of working. Are banks connecting the right pieces of information for a full 360 degree view of each customer or opportunity? How can they really dig into data from diverse sources to create actionable market intelligence? How can they use that intel to support their staff in meeting customer needs, cross-selling or up-selling?
It’s all in the attitude
The primary force for good in terms of designing for PSD2 will be that of having the right approach from the outset. Viewing PSD2 as purely a regulatory hurdle will create shortcomings in design, producing systems that cannot sustain pressure from the competition and new customer demands. Last year, the CEO of ING bank summed it up nicely:
“It is up to the customer whether he allows new entrants to access his account or goes for services from his trusted party. There is no reason why only big or small fintech companies entering the market should take all this new business, as long as we do our best to service our clients and to help them in their daily business as best as we can.”
Preparing For PSD2: Exploring The Business And Technology Implications Of The New Payment Services Directive – Finextra
Most likely, a shakeout is coming and success will boil down to good design and superb execution. Good design begins with having the right attitude and a healthy appetite for new ideas. Success is possible if PSD2 is handled the right way, now all that remains to be seen is who will take up the mantle.