The majority of banks and other financial institutions today only see one direction for development. The digital one. And while this is doubtlessly the right decision the actual path to achieving the goal is different for every organization as banks and insurance companies enter the process at different levels of maturity.
Recent regulatory changes in Europe, namely the Payment Services Directive, will accelerate payments innovation and change the payments landscape. While PSD2 will threaten some of the revenue streams for incumbent banks innovative banks can use it in their favour and compete aggressively in the new post- PSD2 environment.
The challenge for most banks and insurance companies is how to implement the required changes in their IT systems and provide solutions for rapid and more cost-effective regulatory compliance.
Feeling Challenged? Rise Up to the Challenge!
Achieving compliance raises a number of challenges for banks. These are not just technological ones but are present on the operational and strategic levels as well. The technical challenges will be somewhat easier to overcome when the RTS standards are released, but enabling access to external users while maintaining tight security is a challenge of today.
The strategic challenges are much scarier. Banks should be thinking of new tactics on how to take the fight for customers and business to the new market entrants. It might just happen that banks of the future won’t resemble the banks of today any more, but will share more similarities with financial service providers.
Your To-Do List
When preparing for the updated Payment Service Directive, banks might consider do the following:
- Perform a thorough analysis of the business impact of PSD2
- Perform IT due diligence and ensure secure operations (strong customer authentication)
- Ensure compliance with PSD2 (and the RTS) and document it thoroughly
- Establish better collaboration within different departments (Risk, Compliance, etc.)
- Focus on innovation
Payment Service Directive 2 will most probably be the end of banks’ monopoly. So be it. The best of them will still stand strong and successfully compete with non-banking upstarts. But first things first. Compliance brings peace of mind from all the potential penalties and lawsuits. Nobody wants to be on the receiving end of those, does it?
A Note from the Editors
This article was first published as a part of whitepaper The world after PSD2: Compliant or competitive? To unlock the full version of the whitepaper including 4 different strategies on how to approach the new Payment Service Directive click here or on the button below.