As of 13th January 2018, the floodgates of the 2nd Payment Services Directive will open, which means that banks will now be forced to share their customer data with 3rd party providers of financial services and to also offer open APIs to said 3rd parties.
Lets be honest here…
No institution wants to share their pie with others, especially if they can also be indirect competition. PSD2 will generally remove banks’ monopoly on the account information of their customers. The dilemma is that this allows third parties to build whole new financial platforms on top of their initial data and infrastructure. It will not be a bank-eat-bank world anymore, as information for FinTech startups and payment companies will be open for the taking. These are the driving forces behind Innovation in the EU market and that is exactly what the European Commission is banking on. See what I did there?
The use of Application Programming Interfaces, has been extremely well documented over the years, as they are widely inter operable, quite easy to create and make up the front end of many Digital Platforms (think Facebook or Google).
From an economic point of view, this directive offers non-banks the reigns to customer interaction. This creates tension when banks are trying to differentiate themselves (as other digital platforms can offer loans and services faster and at a more comfortable rate).
The silver lining
Banks have already begun to experiment with APIs and also with collaboration and integration of FinTechs and startups into their ongoing products and services. A great example of this would be the collaboration of mBank and Orange – which gave birth to Orange Finanse. This created a much smoother and better financial user experience overall, and this partnership keeps expanding on a-day-to day basis. Alas there are challenges and obstacles along the way, however the added value for customers is so much better. New innovations and ideas spawn daily, and sometimes it is hard to keep up with certain markets. As I mentioned in my previous article, the key here is to get out of the comfort zone and embrace partnership opportunities. With this directive, potential partners could become fierce competition if not approached in the right way.
To learn more about how Orange Finanse blossomed check out our Phoenix FinTech Conference in Prague this September.