by Sarah Maber, Managing Consultant at World Wide Technology
The introduction of Open Banking and the Payment Services Directive 2 (PSD2) disrupted the financial services space, unlocking the potential for a wave of innovation, by opening up swathes of anonymised customer data to third parties. Banks now have the opportunity to collaborate in the creation of truly ground-breaking services. But they're failing to seize it.
Learning from fintech
Open Banking and PSD2 could put banks at the forefront of a revolution in consumer financial services. New capabilities enabled by the legislation are already giving people control of their finances in ways previously impossible. Consider the ability to view the status of multiple financial services in one place, or to make quick and easy payments direct from your bank. Customer experiences such as these, and the further innovations that Open Banking enable, can support banks in expanding their customer bases, especially among the lucrative 24-35 demographic who are currently being courted so successfully by the fintechs.
This understanding that the "mobile generation" expect convenience, speed and transparency in digital financial services has seen mobile banking start-up Revolut acquire eight million customers to date. Indeed, to capitalise further, it has recently created an offering for children aged between 7 and 17, which provides the functionality of a bank account (a current account, a Visa card and transaction push notifications), but is delivered under the watchful eye of a parent or guardian, who can set up a regular allowance.
But while Open Banking and PSD2 offer the chance for banks to collaborate with these exciting fintech players, and bring their expertise and agility into organisations, they are mostly failing to take it. One reason is that banks differ so markedly from fintechs. They typically move more slowly and have such different cultures that competitive tensions are inevitable.
