John Elliot discusses the impact of PSD2 on retail banking

03 October 2017

Are you prepared for the retail banking revolution?

Over the next three years an EU directive will be rolled out making it compulsory for all banks on that side of the Atlantic to open their clients’ data to third parties interested in providing financial services.

Banks will no longer only be competing against banks, but everyone offering financial services.This law, PSD2, will fundamentally change the payment value chain, how businesses make a profit and how customers interact with a brand or service.

But this shift hasn’t come out of the blue, so what are banks doing to safeguard their clients, change their revenue stream and ultimately ensure they survive?

We hear from Investec’s Fintech head,  John Elliott. 

 

How banks can turn the opening up of APIs into an advantage

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02:09 PSD2 is about more people having more access to better financial services, than what's offered in current oligopolistic environment.

02:51 In some respects it's bad news for banks because for a long time we've had a monopoly on this information.

03:08 Placing the control of your data back in your hands, as a client.

04:18 The security standards are so rigorous and tight- makes it a lot more secure.

05:02 If you think about Lego it's probably the best example of an API

06:25 There's no reason why a bank couldn't commercialise a KYC (know your customer) offering

07:43 Give you a better, contextually relevant banking service. There are opportunities for us to change the way we provide services to our clients.

08:43 That means we don't have to go and do the build out ourselves. We can provide our clients with best in class services and monetise those services.

09:05 RMI are doing well with AlphaCode. (Fintech platform for members to engage and work alongside experienced entrepreneurs, technology investors and industry experts, resulting in accelerated growth and access to market.)

10:00 It allows them to take new bets to future proof themselves.

10:23 The partnership that Standard Bank has had with Snapscan (cardless, cashless form of payment using a smartphone)

10:47 I think Investec is very focused on finding the right opportunities to partner with Fintech entrepreneurs.

11:14 We choose quite judiciously around who we partner with. What's key is that the interests of the entrepreneur and interests of financial institutions are aligned and the client is kept in the centre.

12:05 We have an opportunity, not just as Investec, but as an industry as a whole, to take the lessons from the EU and say what should this look like in South Africa.

12:45 Having more competition is generally better. You want strong competitors in the market.

13:58 Banks are risk management entities and they don't move quickly. We need to find new ways of enabling our institutions to  move fast. Agility will determine your ability to survive.

14:42 It's not clear that there's a right answer but whenever there's major change in an industry incumbency is powerful because incumbents have clients and balance sheets to build. 

15:08 In five years time, the big five banks may be three different faces and only two old ones.