Many have said that PSD2 – the second Revised Payment Service Directive – will change the face of competition in retail banking. And demanding more than just the bare requirements is what will separate the winners from the losers. Investing in aggregation capabilities that elevate your business and your opportunities marks just the beginning of true change in the retail banking market.
Following the implementation of PSD2, banks now have a choice. They can either innovate to stay ahead of the game – or lose business to those who do. Smart banks aren’t wasting time on pessimism about PSD2; they’re thinking about the doors it will open.
Aggregating customers’ financial data from other institutions creates a foundation for all services, and gives banks the ability to offer deep insights and tailor-made advice that bring true value to the customer. The ability to aggregate also provides banks with an opportunity to excel in data-driven sales, and expand their advice to product recommendations. Leveraging aggregation capabilities will help them find and acquire hidden assets, fill product gaps or replace competitor products.
As PSD2 forces banks to open their APIs, customers’ financial data is now open to challenger banks, agile fintech startups and the big tech firms of Silicon Valley. This means new competitors. The big tech firms have deep brand knowledge, superior UX, and a loyal existing user base, giving them an opportunity to win a sizable slice of personal finance business. Luckily, banks have the heritage advantage – a deep knowledge of financial products, large customer base and the supporting balance sheet. Pairing this expertise with innovation is what’s needed to pull ahead.
Many have said that PSD2 will be game-changing for the banking industry in Europe. But for years, technological innovation has preceded regulation, and will continue to do so. As PSD2 data – which is limited to payment accounts – becomes a commodity across Europe, it is up to innovative banks to think beyond these limitations. If banks wait to see what their competitors are doing, they will lose out. To succeed, banks need to not only beat the tech giants and more agile players like challenger banks, but also the traditional banks that choose to innovate early at their own game.
A first step is gaining access to all consumer banking data by investing in aggregation capabilities that go beyond the payments data covered by PSD2 standards. This means not only seeing the customer’s payment account data, but also gaining an overview of other assets and loans, such as investments and mortgages. Enriching the data and presenting it in an understandable way means offering more financial clarity for customers, as well as financial products that offer bigger gains. And it presents an opportunity for banks to engage with and expand their relationships with customers – at scale and in a data-driven way.
Aggregating data beyond PSD2 is the key. The banks who act first will win in this new market. They now have a choice to either play catch-up with regulation – or pull ahead with innovation.