Conclusion
Taking the advantage
We believe that a massive opportunity currently exists for banks to turn the regulation—and the broader shift toward open banking—into a competitive advantage. Indeed, those that are able to take a strategic view of the new regulation will likely find significant opportunities to improve their business.
Banks could, for example, create their own account information service providers (AISPs) that provide their customers access to their other banks and payment methods, all within one (branded) mobile app. They could partner with fintech organizations to use that data to identify trends and create new targeted customer propositions. Or, they could explore ways to sell the information to retailers and other third parties.
Those that take a more strategic view may also find that the shift toward an open banking environment acts as a catalyst to their digitization agenda. Yes—the new regulations could probably be met through some new information-technology (IT) work-around and Band-Aids, but the better solution would be to use the regulation as an opportunity to rethink how data is used in the organization, and how that influences the digitization agenda.
Maximize the investment
Three things are required for banks to make the most of the open banking regulation. First, the discussion needs to be elevated to a strategic, C-suite and board level.
Executives will need to think carefully about how they want to respond, what opportunities open banking creates for their organization and what risks are created through inaction. Done right, the shift toward open banking should create new business and operating models, and this must be a top-level discussion.
Banks will also need to become much more focused on creating partnerships with fintechs in order to make the most of the opportunity. In part, this is because speed to market is of the essence; UK banks will soon have a first-mover advantage in 2017 (albeit forced by regulation) and other global banks will need to move quickly if they hope to stay competitive in their own markets. They will also need to partner with fintechs in order to tap into new ideas, create exciting customer interfaces and control cyber risks.
Finally, banks will need to assess their own IT infrastructure, processes and controls to ensure they are capable of not just complying with the regulations but maximizing the opportunity.
Some heavy lifting may be required in order to unlock additional benefits from the shift toward open banking, and banking executives would be wise to understand their resource, infrastructure and capability gaps before moving too quickly.
The race is on
While the regulations are focused on UK- and EU-based banks for now, this is clearly a global issue. European and UK customers are not the only ones seeking easier access to their banking information and payment options. And a “killer” concept gestated in the EU or UK could quickly be replicated in almost any other market around the world. Everybody needs to be thinking today about how the trend toward open banking will impact their organization tomorrow.
The benefit of making a shift globally on this basis is significant in that it will allow banks to go beyond simple compliance in the European market alone to the larger question of enhancing customer-centricity, innovation and competitive advantage on a global basis.
Ultimately, we believe that the shift toward a revised payment service directive or PSD2 in the EU and open banking standards in the UK will spark a competitive race centered around owning the customer and the winner’s spoils could be significant. And our view of the market suggests that it is a race that few have yet recognized has started. Our analysis suggests that early movers who use the opportunity to more broadly innovate their payments practice will gain competitive advantage, whereas those who don’t will create a significant competitive gap regarding both innovation and customer centricity.
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The article was taken from KPMG’s publication entitled PSD2: Don’t miss the opportunity by Jurgen Wagner of KPMG in the UK and Sven Korschinowski of KPMG in Germany.
2017 R.G. Manabat & Co., a Philippine partnership and a member-firm of the KPMG network of independent member-firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. For more information on KPMG in the Philippines, visit www.kpmg.com.ph.