Weighing the possibility of adopting AI and automated decision-making is no longer a choice for banks; this technology has proved its worth in everything from combating fraud to meeting compliance requirements to providing excellent customer service via chatbots. As banks struggle to be profitable in the post-financial crisis era, AI has been an invaluable friend to those that have learned how to make it work for them.
In Europe, PSD2 is opening up previously inaccessible bank-customer data, with customer consent, to third-party providers, all in an effort to provide consumers with more financial options at the best prices. Although some bank managers are focused mostly on compliance, others are looking at the bigger picture: at Open Banking as a new opportunity to boost customer satisfaction and meaningful interaction.
The introduction of the European Commission’s banking directive PSD2 both recognises the shift towards Open Banking and helps drive the change; with banks expected to share private financial data with third-party providers at the request of clients, the payments industry is entering a period of radical change. What are the implications for the financial landscape, and how are banks adapting to the revolution?
For European banks, regulations (GDPR, MiFID II, PSD II, Open Banking) are aligning at a time when they are already warding off digital disruptors intent on wooing customers with convenient, cutting-edge technology-based offerings. Financial institutions that adopt a wait-and-see approach will likely lose ground in a rapidly changing financial landscape, but those who adapt and maximize their formidable advantages will prevail.
With the implementation of the Open Banking Standard, the United Kingdom embarked on a new era of openly accessible customer financial data, which should result in greatly improved products and services. If financial institutions work together to innovatively collect, analyse and share data, customers’ needs will be most efficiently satisfied; that is why Open Banking is not confined to the UK but is spreading worldwide.
Shouldn’t customers in Europe be “all in” for Open Banking, which promises to give them control over their data and open the door to much improved financial products and services? Instead, customers have been slow to embrace the Open era, fearing their data may be compromised. Financial services providers have their work cut out to persuade customers to cross this new frontier.
The Second Payment Services Directive, which transfers control of data from banks to customers, has created difficult questions that affected banks operating in Europe must answer if they want to maintain their competitive edge and hold onto their customers in an increasingly crowded financial marketplace. Fortunately ground-breaking cross-selling and loyalty programs allow banks to compete and win against shrewd third parties.
Open banking is set to send shockwaves through the UK’s banking industry in 2018. Consisting of the CMA’s open banking remedy and PSD2, the initiative will make it possible for financial institutions to share financial transactional data with third parties online, with the aim of improving people’s banking experience.
When it comes to something as highly regulated as the banking industry, open source may not be the obvious technology to choose. However, with the rise of Open Banking — which likely came about as an answer to what is probably the most often cited regulatory requirement for financial institutions
Until very recently, financial data pertaining to a customer’s account information was made available only to his/her own bank. But since January 13, those rules have changed.