We are at the end of January 2020 and PSD2 (payment service directive) has been in effect for 4 months. Has it really changed anything?
The short answer is yes, but maybe not how the EU thought it would. The purpose for the directive was to increase competition and participation in the payment industry from non-banks, and to provide a level playing field by harmonizing consumer protection. It did that by forcing the banks to share their payment account information and possibility to make payments, and created a set of technical standards on how to keep the customer secure.
Product Owner - Banking as a Service
Sparebank 1, Norway
Account information has little value
In Norway the following happened. In advance of PSD2, some of the Norwegian banks started sharing their account information bilaterally. This meant that when PSD2 actually came into effect, for the customer, nothing new actually happened. In addition, the average Norwegian only has 1.9 bank connections, so the need for the AISP dimension is small. This was also confirmed by a study done by Cicero last year, where account aggregation was the least sought-out feature for the private market, and then by a Mobey Forum survey showing that the number of consumers using account aggregation services remains between 0 and 2% in all countries surveyed (Finland, France, Germany, Spain, United Kingdom).
I realize that the number of connections might be larger in other markets, but for your day-to-day spending, it is still low, and the other accounts (like savings and loan) might not be interpreted as covered by PSD2.
Payments only became harder
But payments then – what about payments? Well, the largest change I think our customers have seen with payments is an impressive increase in the number of times they have to sign a digital payment compared to what they had before. I am not sure they find it that customer-friendly when they suddenly have to sign every bill from the power company. This has caused huge interest into how to achieve delegation of secure customer authentication to make the customer journey as easy as possible. This is a minefield I don’t think was expected.
The Fragmented Model
The bank here will partner with fintechs that have a product or service they consider to be a unique proposition and can leverage on the bank’s client base. The challenge here is to guarantee that the bank network is able to sell the new product and service. On the economics side, the splitting of the value chain to allow each actor to have a decent return is key.
Data is unreliable, so hope of an overview is non-existent
The treasure trove being promised by the AISP dimension was, for some, data. The transactions more specifically. A customer’s transactions tell you so much, and are key to be able to offer any type of “personal finance management” or guidance. Again, I think most are disappointed, and the main reason is that the data is not dependable. How much history you get depends on the bank; what type of accounts you get depends on the bank’s interpretation of “payment account”; whether or not you get credit cards depends on the bank. So, the hope of an overview is close to non-existent. In addition, making a consent that allows you to utilize this data in a valuable way for your company is hard. The willingness to pay for personal financial management is low.
There is hope
But, PSD2 has done two things:
- It made every bank in the world know what an API is.
- It made them create an infrastructure to supply others with their data, free od charge.
So now as a bank, I have this infrastructure, which is a cost, but I have knowledge of APIs, so the only thing that makes sense is to see if I can offer other services that actually can give value. Zero steps for PSD2, but one huge step for open banking. And in that manner, one huge step for partnerships, collaboration and competition.
Which also helps the non-banks with one thing – which is trust. If I again look at Norway, trust in startups is at 6%, trust in social media is at 3%, but 46% have trust in their bank. To be a bank partner helps with trust, in addition to the volume of customers, capital and brand.
In reality the only thing with PSD2 that I still find a bit exciting to watch is the impact on the business market, especially the battle between the banks and the accounting systems. But the impact of PSD2 on business banking has been a very under-discussed theme, and remains to be seen.
“Open banking: open minds? Consumer appetites for new banking services” by Mobey Forum’s Open Banking Expert Group
Under lupen: PSD2 er her Cicero Consulting