Between the mood of optimism and the final spurt: the PSD2 architecture must be in place for payment services by mid-March of this year. Once in place, account information and payment initiation services will be authorised to access customer data via an interface set up by the banks, if the account holders so wish. This creates the prerequisites for Open Banking.
Among many of today’s financial institutions, PSD2 and Open Banking evoke, at best, mixed feelings. Those in charge of these institutions fear for one of their most important assets: the data of their customers, which they will have to share with the competition in the future. The “how” is the smaller problem. For example, we have put together an all-round carefree package that makes it possible to implement a PSD2 test environment within 45 days. It is often more difficult to reshape the corporate culture in a different direction. The “Bankenreport Deutschland 2030” (Download) by Oliver Wyman states: “In many banks the focus is on the inside. Topics that go beyond current focal points such as regulation and cost optimisation are neglected.”
Platform economy gives customers the choice
Financial institutions often misjudge the fact that many industries are already completely permeated by the platform economy. A look at the retail sector offers an indication of what the financial industry will soon face. It recently became known that the Kaufhof department store group’s Christmas business 2018 had performed worse than the previous year. Against that trend, the chain also posted a fall in sales in its online business. Amazon, on the other hand, reported its best Christmas period in its history. Transfer this market evolution to the banking world and it becomes clear that the “Kaufhöfe” of the financial industry should take something from the Internet giant’s experience. This means a willingness to open up to the offers of third parties, and join forces with other banks, fintechs and additional companies in order to remain attractive to customers spoiled for choice by the platform economy .
Back to the roots: a look at the book industry
Amazon started out as a bookseller, and it is this very industry that is now demonstrating how to stand up to the online giant. After a few turbulent years, the Thalia bookselling chain is now on course for growth. According to CEO Michael Busch, the recipe for success lies in “linking our sales channels ever more closely”. He adds: “Now we have to take the next step and become a content, service and experience supplier in order to remain relevant for people in the future as well. Thalia’s nearly 300 stores in Germany, Austria and Switzerland, and its online channel, are interlinked. “Omnichannel is the right way to go, because both channels are fruitful,” says Michael Busch.
The Group’s goal is no less than “to keep the book trade nationwide in German-speaking countries”. Together with the big players Bertelsmann, Hugendubel and Weltbild, the company successfully launched its Kindle alternative Tolino in 2013. Michael Busch adds: “Only with alliances and networks can all industry participants act and scale sensibly in the market.” He takes up the cudgels for the platform economy: “Platforms are important for new offerings to gain momentum. Large players can help to initiate them, but then it makes sense to open them up to the entire industry,” Busch concludes.
Learning from other industries: with PSD2 into the platform economy
As things stand today, financial institutions still find it difficult to cooperate with each other. That, however, need not always be the case. According to the bank report: “Market participants, whether local or supra-regional, who adhere to a classic, integrated banking model, will have similar difficulties in a strongly changed environment as, for example, formerly successful department stores or change-resistant manufacturers of electronic hardware (“museum banking”) experienced.”
A change of perspective is urgently required, and PSD2 invites institutions to do so: It is true that a bank loses sovereignty over “its” data if it makes it accessible to third parties at the customer’s request. On the other hand, however, it is also in a position to use the data of other institutions itself. Open banking is therefore not a one-way street, but has the dynamics of a wave: the data flows off and returns in a changed form – either as data from other customers or as data records enriched with new information. APIs create the prerequisites for integration into the platform economy. They enable banks to find and shape their own role in the digital financial ecosystem.
In our white paper “Open Banking: The future of the financial sector in the platform economy”, we outline various ways of exploiting the potential of PSD2 for your own institution. Download it here!