There will be no instantaneous change when September's final deadline for Europe's second payments directive (PSD2) passes, and the industry can expect an acclimatisation period for many of its large institutions according to Jim Wadsworth, senior vice president of Open Banking at Mastercard.
Speaking on the sidelines of Money 20/20 in Amsterdam, Wadsworth said the arrival of Open Banking and PSD2, while placing strain on the technology teams of banks in one respect, has also given them an opportunity for innovation in another.
“September 14 is the magic date, but will anything be radically different September 15? No, of course not. There will be a bedding down period. Fintechs are concerned about things like ‘will the backs APIs really be ready?’ and ‘will they work properly?’ It’s a concern that will take some time to sort out because there will obviously be banks that are better at it than others. Not every bank will make the date but wind the clock forward and some interesting things will start to play out.”
According to data from the UK’s Open Banking Implementation Entity (OBIE) the number of successful API calls made by third party providers (TPPs) using Open Banking APIs rose from 26.9m in February to 38.2m in March. The average API response time that month was 798 milliseconds, a quarter of the figure from August last year.
“Whatever compliance date is looming is not the real issue here,” said Wadsworth. “What really matters is what happens when the principles in PSD2 or Open Banking become the norm. But we do absolutely think that if this market is going to be successful one of the things that needs streamlining is that connectivity piece.
“If I'm a fintech, or indeed a bank, trying to create an Open Banking service, across a range of markets, I've got a choice between building different APIs or I can outsource. Lots of people want to focus their delivery teams, their tech team on building out their core services, not getting distracted with lots of back end plumbing.”
“When that sort of change is happening, when our customers are asking for help, you pay attention to it. You say, ‘okay, what does this trend mean, and what unmet need could Mastercard try and help with?’”
Mastercard launched its Open Banking Solutions platform this week, which aims to support banks and third-party providers (TPPs) to prepare for the implementation of Open Banking standards.
“Another thing we’re looking at, another unmet need, especially in Europe and the regulatory environment, is that if I’m a bank I’m going to be to whom my customers turn if something goes wrong. That kind of implied risk for a bank, even if the problem has been caused by someone else, is a worry.
“We have a tool that will help banks check in real time if this third-party provider is regularly regulated. Does it have a good track record, or have they caused problems for other financial institutions. Is this transaction consistent with their normal behavior, or it something like €20,000 more than it usually is? These are concerns that we’re trying to mitigate.”
According to Wadsworth, it’s in everybody’s interest to build trust in the new ecosystem. “One of the kind of truisms of how you build trust is this: it’s good if the service works like it's supposed to, and that's preferable, but if things do go wrong you can avoid burning a lot of that trust by making it right quickly. Likewise, you can damage that trust by playing the blame game and trying to pin everything on your banking or fintech partner.”