08/11/16
More than two-thirds of Europe’s banks fear losing the customer interface as a result of the Payment Services Directive (PSD2)

PSD2 will trigger market developments beyond payment services according to PwC’s Strategy&

While the adoption of the revised Payment Services Directive (PSD2) in 2018 will be a catalyst for both disruption and strategic renewal in Europe’s banking markets, the overall response of Europe’s bankers to more open banking is one of uncertainty, according to a new study by Strategy&, PwC’s strategy consulting business.

While the adoption of the revised Payment Services Directive (PSD2) in 2018 will be a catalyst for both disruption and strategic renewal in Europe’s banking markets, the overall response of Europe’s bankers to more open banking is one of uncertainty, according to a new study by Strategy&, PwC’s strategy consulting business:

  • Sixty-eight percent (68%) of bankers fear that PSD2 will cause them to lose control of the client interface and many remain unsure how to respond to the new directive.
  • Eighty-eight percent (88%) of banks expect to see growing competition from third party digital services providers
  • Sixty-eight percent (68%) believe that PSD2 will (further) weaken the position of Europe’s banks.

According to the report entitled Catalyst or threat? The strategic implications of PSD2 for Europe’s banks the fears voiced by the banks result from two new PSD2 requirements:

  1. Third parties, such as fintechs, telecom providers, tech and data companies, will fall under the scope of regulation and will hence be officially recognised as participants in the payment services market and,
  2. Banks will have to provide these third parties with access to account and payment data, allowing them to leverage client data for value adding services or to execute payments on behalf of customers once they have given their consent.

Europe’s consumers have started to embrace the kind of open banking that PSD2 will foster which indicates that there is a large, primed base of customers for other kinds of digital banking services.

  • Eighty-one percent (81%) of consumers surveyed for the study use third party services, such as online payment systems to shop online.
  • Eighty-two percent (82%) agree fully or in part that online retailers and others can handle payments just as securely and reliably as their own banks.

Banks have recognized the need to act. Seventy-six percent (76%) of banks stated that customer focus was their top priority for the coming years.

“PSD2 will lead to new market developments which banks should not ignore,” says Jörg Sandrock, a partner with PwC Strategy& Germany, leading the financial services digitisation team. “Customers want a convenient user interface providing access to all different, specialized services. Leading banks will leverage their existing client base and trustful relation to provide such interfaces – if not, fintech or tech companies will be there and banks may become infrastructure providers, if customers don’t see a value add in visiting their banks’ digital platforms.”

The authors expect PSD2 to trigger market developments in open banking that go beyond payment services. Standard interfaces (application programming interfaces, or APIs) will likely be set up to exchange data between banks and other parties, and to offer access to the banking infrastructure. APIs are already a key part of many digital business models used by start-ups, such as fintechs.

“Innovative start-ups and banks are showing that APIs, data and partner-based approaches can promote a customer focus and increase speed to market in financial services,” says Sandrock. “These companies are not waiting for PSD2 to be introduced in 2018, they are acting now and more importantly, addressing the strategic implications beyond PSD2.”

End notes
The report Catalyst or threat? The strategic implications of PSD2 for Europe’s banks is based on interviews with 30 leading European banks in eight different countries, a poll conducted amongst 1,000 customers regarding their payment and digital financial management behavior, as well as case studies of selected European fintechs. It offers five approaches for banks to consider and explore in their strategy for addressing PSD2 and open banking. To learn more, visit http://www.strategyand.pwc.com/reports/catalyst-or-threat. A copy of the paper is available from the media contact.


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Kiran Chauhan
Global Public Relations
Strategy&, PwC's strategy consulting business
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