2017/4/18

by Hans Tesselaar, executive director BIAN

With just nine months left for banks to prepare for PSD2, the impending regulation that will see third parties able to access banks’ data through open Application Program Interfaces (APIs), there’s a definite sense that both the finance and technology industries are sitting up and paying attention.

It was with this in mind that we used this specific topic as the focus of our latest industry event, based in London. The fact that our event was oversubscribed, with some of the biggest names in the industry, across both finance and technology in attendance, seemed to confirm our assumption.

We used the opportunity to quiz our attendees on their views of the regulation that is shaking up the industry.

Despite the apparent talk about the issue, just 16% of the banks we spoke to at the event believe that their enterprise is “completely prepared” for PSD2, with everything set for when the regulation kicks off in 2018. Perhaps because of this lack of preparation, the majority of banks expressed that they believe PSD2 to be more of a threat than an opportunity.

So why are banks so pessimistic about this impending legislation? The individuals we questioned unanimously agreed that banks do not make the best use of their data. On this point, solution providers were in agreement – again 100% of respondents in this category agreed that banks fail to maximise on their data.
The main risk here is that once tech savvy FinTechs have access to banks’ data; they will discover far smarter ways of analysing it for insight on products and services.

Meanwhile, more than 60% across both the solution providers and banks that we questioned expressed concerns that banks will struggle to even open up their APIs, as the regulation mandates, because of the “current state of banks’ core architecture”.

While there was general agreement on the topic of PSD2 across both banks and solution providers at the event – there was one issue on which the two groups fundamentally disagreed. In stark contrast to the opinion of the bank representatives we spoke with, the solution providers felt strongly that PSD2 is an opportunity for banks, rather than a threat.

Despite the clear tech challenges that banks will face in the wake of PSD2, it’s promising to see that the tech experts, at least, feel optimistic. They believe that banks can not only overcome their legacy issues, but ultimately use the regulation to their advantage – expanding their ecosystem through FinTech collaboration and embracing new revenue models.

Clearly, what’s required, is for the IT and financial services industries to put their heads together. The two sides need to collaborate to draw up a roadmap for the future of banking technology, with considerations for cloud and open data – aligning tech and business capabilities from the core architecture, right through to the APIs and ultimately the customer-facing technology. At BIAN, we are demonstrating this collaboration in our PSD2-API project with Carnegie Mellon University.