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PSD2: The digital transformation accelerator for banks
Journal of Payments Strategy & Systems,
10
(1),
13-27
(2016)
Abstract
The revised Payment Services Directive (PSD2) is not ‘just another regulation’ requiring a mere operational and compliance approach, but an accelerator of the already on-going change in the fabric of the — digitisation prone — financial industry. The PSD2 provisions on ‘Access to account’ for Payment Initiation and Account Information Services (‘XS2A’) will accelerate this by forcing banks to open up consumer payment accounts for appropriately licensed, innovative (bank and non-bank fintech) service providers. A pivotal element to this concept of opening up payment accounts is the development of Application Programming Interfaces (APIs) by banks. Fintech players are seeking to capitalise on the emerging API landscape and to capture customer and developer mindshare as well as payment and non-payment (data rich service) revenues long taken for granted by incumbent financial institutions. The key challenge for leaders of incumbent financial institutions is to ensure PSD2 XS2A compliance, while at the same time retaining customer relevance and maximising addressable market and revenue potential across a rich transaction services portfolio. APIs could redefine the financial services distribution game of banks. Some financial institutions see PSD2 XS2A and APIs as an opportunity to work closer with emerging fintech companies. Others see it as a threat to their business. This has led to different strategic choices for banking leaders. The authors have identified four generic strategic options (ie, Comply, Compete, Expand, and Transform), fitting the wider spectrum of leader attitudes towards PSD2 XS2A and adoption of APIs as a business strategy. All options come with strategic, tactical, and operational considerations and will be elaborated upon in this paper. Making the ‘right’ strategic decision will require banking executives to (re-)consider their future ambition, desired position in the value chain, the accompanying transaction portfolio, and impact on the operating model.
Keywords: PSD2; XS2A; fintech; APIs; bank as a platform; customer relevance; digital transformation
The full article is available to subscribers to the journal.
Author's Biography
Mounaim Cortet is an experienced strategy consultant at Innopay. He specialises in helping banks and various payment service providers operating in the payments value chain navigate through times of change in consumer behaviour, advances in fintech, and regulatory intervention (PSD2, IFR). He possesses resilient analytical and problem-solving skills with a track record in digital (growth) strategy, (open banking, API), business model innovation, and value proposition development.
Tom Rijks is a member of Innopay’s Management Team responsible for the API proposition suite and the ecosystem innovation competence. He is a new business development expert with extended experience in bringing digital propositions to the market. Tom has more than 15 years of experience in the payments and e-commerce industry. In his ten years as consultant Tom has worked with financial institutions such as ABN AMRO, Rabobank, ING, Equens, and CCV.
Shikko Nijland is owner and Managing Partner of Innopay, which is an independent consultancy firm specialised in payments, digital identity, and e-business. Shikko is an expert in multisided platform innovation, fintech, and growth strategy. He is also chairman of the Shopping Tomorrow transactions expert group, lead mentor at Startup Bootcamp, member of the advisory board of Money2020 and he is one of the founding members of Holland Fintech.
