Lifting the lid On Open Banking and APIs

by Joseph Walent 0

The speed at which various FIs are prepared to comply fully with the latest payment directives (PSD2) appears to largely be framed by how they view the wider market and their own role in that same market. That said, the impact to consumers will be similar, with more freedom and choice accompanied with the implicit need to exercise additional due diligence.

PSD2 seems like a mixed bag. On the one hand, it forces banks to let go of their stronghold of data and services, and this is meant to create competition and create opportunities for other players. For an industry that has been criticized as having really meaningfully innovated for the last time more than 50 years ago when introducing the ATM, this may provide a useful nudge.

Fintech is already one of the fastest growing industries, and opening up opportunities in this domain should encourage its growth even further. While PSD2 is only applicable in the EU, presumably similar to GDPR all financial institutions operating there will have to comply. As there are already Fintech companies that operate worldwide, their users should be able to benefit from the additional services they would be encouraged to provide, thus putting more pressure on the rest of the industry as well.

On the other hand, this blurring of boundaries between banks and non-banks can also have its dark sides. The question of whom you should trust with your data becomes even more pronounced when it comes to potentially very sensitive financial data.

Mercator Advisory Group views PSD2 and having a variety of impacts in the global market and the participatory regional markets beyond the EU. The role of the individual and access to financial history will play a wider role in how services are developed and delivered. Winning consumers will increasingly come down to personalized advice that leverage customized solutions that align with the individual’s unique past and future aims. PSD2 will be a step, but just that, a step, in the drive to customer centric solution delivery.

Overview by Joseph Walent, Associate Director, Customer Interactions Advisory Service at Mercator Advisory Group

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