On January 13th, the Revised Payments Services Directive, more commonly known as PSD2, went into force in Europe. The regulation, aimed at increasing competition and innovation among financial institutions, is going to revolutionize the way banking and payment services are delivered. PSD2 requires banks to open up access to previously proprietary customer data to third parties like fintechs and retailers. This gives non-bank organizations the critical information needed to build their own personalized financial products and services and the opportunity to challenge the status quo of financial services in Europe.
What does this mean for consumers? Hopefully a new era of customer-focused financial services. Now, incumbent banks will be pushed to improve their own offerings as smaller, more nimble, digital native challengers fight for market share. Already apps and services that enable consumers to gain a single view of their financial accounts in one location are being developed. Additionally, consumers will be able to make direct payments from their bank account to retailers, reducing fees and increasing the speed with which transactions are completed.
By requiring that customer data is shared via secure, standardized APIs, PSD2 also shifts the area of expertise from traditional financial services to technology companies. Google, Facebook, Amazon, Apple, tech giants that already deliver payments and ecommerce capabilities will now be well-situated to introduce their own financial services products, if they so choose. Traditional banks will need to fight to maintain customer loyalty as new alternatives emerge. Simultaneously, consumer behavior will change as the cost and difficulty of switching financial service providers will drop. No longer will customers be loyal to one bank throughout their customer lifecycle. Instead, they’ll explore different brands, products, and services, looking to find the one that fits their needs best. To avoid this disintermediation, banks need to find ways to build trusted relationships with their customers.
To learn more about PSD2 and the critical role that digital identity plays in compliance and innovation around the regulation (securing payments, controlling account access, managing customer consent and protecting data privacy), watch this 2 minute clip.
Visit our financial services solutions page for more on ForgeRock’s solutions for PSD2 and digital banking.
Ken is Senior Industry Marketing Manager for Financial Services, at ForgeRock