Published on : Jun 09, 2016
The European Union’s Payment Services Directive 2 (PSD2) is expected to accelerate the fragmentation of the retail banking indstry. The opportunities offered by PSD2 will lead to strong brand awareness among banks. Advanced digital offerings by banks will push the boundaries of open banking in the near future. Growing competition from non-bank third-party providers and card issuers will prompt the mid-cap players to evaluate their strategies. Furthermore, the capping of interchange fees will force card issuers to aggressively enter into the personal loans market. In the coming years, there are very high chances of banks collaborating with third parties. However, this might let them loose control over customers.
New Regulations Focus on Customer Protection and Security
With the help of open banking, third-party developers can use open source technologies to build financial applications. The usage of API means that banking data will be available on real-time basis for third-party applications. These applications will help customers with better ways to invest, save, and transact their money. The small and medium enterprises will be able to access real-time bank data while using commercial software. Consumers will be able to access better loan terms as lenders will be able to easily determine the risk level of a borrower by accessing historical transactional data.
The Euro Banking Association (EBA) is stressing on embracing large-scale transformation occurring in the European payments landscape. The European Commission has adopted PSD2 to bring vital changes. Under the new regulations, consumer protection and security are being given high priority. The revised version of PSD2 bans payment services from restricting third-party account information access. Furthermore, payment services are restricted from treating payments going through third-parties differently from those coming directly from customers.