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SIBOS day 2 – Banks should learn the lessons of telco operators to fully exploit the potential of PSD2

Sibos 2017Retail banks should position themselves as the every day digital bank with strong customer relations and provide services throughout the lives of their clients, support key events such as student loans, providing mortgages and pension plans. If they choose otherwise and follow the example of the telephone companies they may end up as a pure utility. That was the key message of Thomas Feiler (Manager Product Management Global Payments at equensWorldline) during his presentation on PSD2 at the second day of SIBOS.

His presentation ‘Unlocking the potential of PSD2’ focused on PSD2 and why banks should see this as an opportunity rather than as a threat. One of the main reasons for PSD2 was to enhance innovation. But PSD2 is not the only regulation and development within the payments industry. The combination of regulation such as GDPR and eIDAS with trends like Open Banking and Blockchain cause further complexity in the payments industry. Feiler: “For any party it is of the essence to deal with this in a cost-effective way and come to simple solutions.”

Thomas Feiler at SIBOS

PSD2 fuels the trend of Open Banking

Feiler stated in his presentation that the PSD2 regulation fuels the deeper trend of Open Banking, because it provides the possibility of access to a couple of basic services from banks, which can help service providers to optimize payment instruments and provide other services based on account data. Banks must allow access to accounts so that Third Party Providers (TPPs) can initiate payments (and become a Payment Initiation Service Provider (PISP) or are able to provide services as an Account Information Service Provider (AISP). This can be seen as a threat because banks can be perceived as merely the infrastructure provider while the TPP tries to get into the relation with the bank’s clients.

New role is necessary

On the other hand, this can also be seen as a huge opportunity for banks to take a new role in the payments ecosystem. That new role is necessary, because banks otherwise will follow the example of the telco operators around the Millennium. Those companies were stuck to their role as infrastructure providers and were seen purely as a utility or commodity, while other companies used that infrastructure to create services and apps. Banks must be aware of this example in their new future, when they define their strategy for PSD2. When they only comply with PSD2, banks become a utility. However, by going beyond pure compliance they can secure revenues by controlling account information (and provide data services or TPP services), or even add value to their services by becoming an every day digital bank with a strong customer relationship.

3 tips to become a digital bank

To become this every day digital bank, Feiler has three tips for banks:

The first tip is that banks should leverage their trust and security assets. Digital services require trust, trust relies on seamless and strong customer authentication and strong authentication enables digital identity services. Identifying with banking credentials could become the standard, which means that the bank will be at the start of the transaction.

The second tip is that banks should leverage their 360 degree view of their customers. Banks should be at the center of the open banking data collection, because this data opens a load of opportunities, since it provides insight into customer behavior with a 360 degree view. Banks can make use of this and are able to offer the right service at the right time, to make the bank the digital assistant in each life moment. Banks can then support key events with financial advice on, or funding of, a new house or a car.

Banks should become the every day bank was the third tip in the presentation. This means that banks need to stick to the core of the daily lives of their customers as a financial service provider, being able to use data from different sources and providing end-to-end services by orchestrating the ecosystem, working with different partners and focusing on concrete value propositions for its customers. This requires to become a TPP (PISP and AISP) and to ensure that customers see the bank as their principal bank.

With these three tips banks can focus on their strategy to build their new future. PSD2 offers great opportunities to reinvent themselves again. We are convinced that the time is right to work actively on these opportunities by creating a platform, where fintechs and banks can create an innovative and smooth customer journey in a highly secure environment. PSD2 is not a threat, it is the golden chance to create value for customers.

Click to download the presentation of Thomas Feiler: SIBOS 2017 – Open Theatre – Unlocking the full business potential of PSD2

This article was posted in PSD2, SIBOS 2017.

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