by Hans Tesselaar, Executive Director, BIAN
Sibos is well regarded as the financial conference of the year. It attracts all major banks and financial providers and you’re certain to hear from the leading experts and influencers in the industry. A key topic that shone through this year was the idea of collaboration and the coming together of participants in the financial ecosystem.
This year, we saw many more fintech companies present and even a dedicated ‘FinTech Theatre’ showcasing the most promising new businesses. When it came to the agenda, we saw presentations entitled ‘why startups and financial institutions need each other’ and ‘collaboration at the core of revolutionising cross-border payments’. It’s clear that working together is the future, which is an important realisation to come to in light of PSD2 which will revolutionise the space come January 2018.
Preparation for PSD2
It’s great to see that organisations are beginning to realise that collaboration will be the key to success in a post-PSD2 world. However, in order to truly embrace and maximise on what the new directive could truly offer, banks need to be working on a standardised, capability based infrastructure. The implementation date for PSD2 is fast approaching and, as of next year, banks will need to be able to provide third parties, such as fintechs, with access to customer accounts via APIs. This will allow those third parties to build their own services on top of a banks’ data and infrastructure.
When this happens, the government’s aim of boosting competition should be realised within the financial space. We’re likely to see fintechs and startups building on the banks’ data to create and provide new services, one of which could be the creation of comparison sites for banking services — much like we see for insurance and flights.
Challenges and opportunities
While this may seem like a scary concept for banks who will see even more contenders to compete with for customers, this ‘sharing nature’ of open APIs that will be created by PSD2 doesn’t need to be all bad. It could actually greatly benefit the banking industry in terms of new opportunities and the potential for growth.
With PSD2, banks could easily outsource technology services to, and insource services from, the younger, more innovative startups meaning that they wouldn’t necessarily have to own all of the technology or infrastructure required to provide a certain service. A good example of this in practice already is with banks using Transferwise for international payments — they can offer the service, but don’t need to invest in building and maintaining an infrastructure themselves. This subsequently means that banks will have more flexibility, but also stand the chance of attracting new audiences, such as millennials, with their enhanced level of customer service.
Laying the groundwork
However, there are still changes required if banks are to truly embrace a PSD2 landscape — it will take more than just simply the sanctioning of open APIs. If banks are serious about outsourcing technology based on this information at a later date, they must first look at their own infrastructure and modify it so that it can support this new technology.
Today, the current architecture of traditional banks does not allow for collaboration of this type. If all banks are to set themselves up to prosper from the incoming sharing culture, a standardised framework across the entire banking industry is paramount. This standardisation will allow for the synchronisation of APIs and IT systems across the landscape.
Banks can only make one move now. With open APIs soon to be a reality, they must alter their back end structure to accommodate for them. They need to be implementing a uniform platform that will allow for the progression of the industry, leaving behind the archaic and inefficient architecture that is currently holding them back. It’s clear from the discussions at Sibos that collaboration is at the forefront of banks’ minds. The next move now is to act on this and take the necessary steps to ensure this becomes a reality.