Patrick Tans, Senior General Manager, Banking Products, at KBC Bank was a panellist at The European Payment Summit 2017, and stated that banks were facing the biggest upheaval to their industry for over 600 years. But how does the industry feel about the shift in regulation? We spoke to senior figures from across banks and fintechs, as well industry experts, to gauge their views on whether the regulation will be the biggest shake-up to banking in six centuries.
Brian Gaynor, Executive Director, J.P. Morgan
PSD2 will provide an environment for new payment methods to emerge and grow across Europe. Not since the implementation of the euro currency has there been an opportunity to provide common payment methods across the EU, which to date have been localised and restricted by national boundaries. Many new initiatives will emerge based on the openness to initiate payments coupled with the availability of mobile and the emergence of instant payments. Only time will tell which of these emerging brands will become common standards across the EU.
But as a European initiative, will these new payment methods be able to break the boundaries of the EU and become global? The only truly global payment methods are cards. The card rails, irrespective of brand, are familiar to all consumers; localised but global. Cards have proven to be adaptable and grow, balancing the needs of merchants and consumers, convenience and risk.
Cards will continue their growth as the global payment method, but in the face of increasing competition from new EU systems spawned by PSD2 as well as those emerging in other regions, such as Alipay.
Gene Neyer, Head of Industry and Regulatory, D+H
PSD2 is ‘turning banking inside out’. Open access shifts control to the customer who will be able to pick and choose products and services from different banks and fintechs. This represents a definite sea change from today’s product centric model. Banks will be forced to consider their strengths and weaknesses and choose what they want to represent to their customers going forward – a superior producer (like Walmart) or a platform and a destination (like Amazon). The business model shift will have to be accompanied by an architecture refresh; banks burdened with siloed infrastructure, will have a hard time competing with banks whose capabilities are harmonised across the enterprise.
This is an opportunity for banks to reassert their strengths, and to leverage both the consumer trust developed over the centuries and the massive technology investments that have made many banks into technology powerhouses in their own right. The financial industry has been re-inventing itself for centuries, as it did when it moved from paper ledgers to electronics. PSD2 is a major milestone, but banking will carry on.
Anish Kapoor, CEO, AccessPay
It’s certainly the biggest and most fundamental shift in banking that I believe we’ll see in our lifetime. It’s more about a shift away from banks that have all the controlling access to financial services, and opening up APIs to third-party providers. PSD2 is arguably the biggest change in terms of the way and which businesses and consumers manage their financial services; the future of banking is going to look very different to the way it does today. I think PSD2 is just starting that process; there’s a bigger shift going on in the market in that direction.
Brett King, CEO, Moven
I think you can say that in terms of access to banking, it represents a very significant change for the structure of the UK banking market. But the most significant change in the last 600 years? I would argue that the internet and the smartphones’ impact on banking on a long-term basis are more impactful.
If we were to start from scratch today and build a banking system – would it look like the banking system that we have today? The answer to that question is no. If you look at markets that give us indication of the future of financial services, such as China, India or Kenya, these are the geographies where we’re seeing these new types of payments systems emerge that are radically different. The exciting and interesting opportunity here is for us to think about the context of payments in very different ways.
Anyone with access to the PSD2 layout will be able to come up with revolutionary payment experiences. In that respect, it’s very exciting to think about the greenfield payment experiences that can be embedded in a consumer’s life around service providers that doesn’t need to be
bank oriented. As a result, I think some of the innovation we’re going to see in payments will be incredible.
Evelien Witlox, Global Head of Payments & Cards at ING
PSD2 is a major milestone on the way to an open financial services market. It will be a great test for a range of financial institutions who need to rethink and redefine their business models. This is really the game changer of the decade; the inevitable, unstoppable opening up of the
payments infrastructure for competition and new entrants.
This regulation creates both a challenge and an opportunity for both incumbent banks and new entrants. Since it allows for payment initiation by third parties and sharing of account information with third parties, PSD2 is potentially highly disruptive. While some banks may be relegated to being pure account service providers, ING is taking the opportunity to develop multi-bank or bank independent services ahead of PSD2 that work to the benefit of customers.
PSD2 is also encouraging a move towards open banking and integration through the mandated use of APIs. Technical development of API solutions is the most visible part of the challenge for banks and they need to focus more on the support processes as well as security across
the value chain. To prepare, ING is itself implementing an API-based architecture in order to learn how to deliver better, faster services internally – before translating those findings through to customers.
Steve Kirsch, CEO, Token
It’s a big change for banking and it’s a bit scary. Bankers don’t like change: change is hard. It’s clear that it’s a change for the better. I think there may be some issues in implanting the changes in the short term in terms of making that transition, and there might be some breaches and problems, but in the long term, I think it’s the best thing to happen to banking in history. It’s really going to open up the banking system to new applications that weren’t possible before, and to improve applications that exist today.
Tanya Andreasyan, Editor, Banking Technology
I think that calling PSD2 the biggestchange in banking in over 600 years is somewhat over the top. However, it is undoubtedly a huge advancement in altering the place and roleof banks in the society. PSD2 will openup the market to more competition – and collaboration – in a way no regulation has done before.
We’ll have to see whether traditional banks keep their banking crowns, or whether new fintechs emerge as clear winners once PSD2 comes into effect, asboth sides have their share of challenges and advantages. But I do believe that the biggest winners of this fundamental shift will be you and I – the end consumer.
Read part one of the PSD2 series here.