PSD2: 5,000 Banks, 18 Months, and Lots of Work to Do
In a mere 18 months, 5,000 financial institutions across Europe will be required to provide open access to customer, transaction, and payment information via APIs.
“This is a massive amount of work,” said James Whittle, director of industry policy for Payments UK, the representative body for the country’s payments industry. He spoke in Milan last week at EBAday 2016, a gathering of senior payments industry officials from across Europe.
In conversations with dozens of EBAday attendees, I reached the same conclusion as James, and found a wide distribution of understanding and preparedness for PSD2, the European Commission’s upcoming policy that aims to provide the foundation for the Single Euro Payments Area (SEPA) and open up banking data and payments capabilities to new kinds of service providers.
Idling at the starting line
A surprising number of banks I spoke with are still trying to understand how the PSD2 regulation will affect them, and what their response should be. They’re largely undecided on what this all means and what they'll do, as the January 2018 PSD2 compliance deadlines looms for all financial institutions in the 28 EU member states.
The financial services industry as a whole is still very early on the path to digital transformation. Discussions among all but the most advanced thinkers were very basic with regard to APIs and digital ecosystems. For example, many are still just learning about the different types of API programs (private, partner, and open) and what it means to use APIs.
That said, I was surprised by how far along some banks were in preparing for PSD2. Several executives I spoke with said they’ve already completed their corporate strategy planning and have requested funding for new digital initiatives. Some have even funded whole new digital banks, while other institutions have been in discussions with fintechs about partnerships.
How to catch up
With a few notable exceptions (BBVA and Nationwide, for example), we’ve seen little actual execution surface. The positive spin on this: there’s still time for banks to quickly catch up on API planning and digital strategy. That said, budget cycles could pose problems if financial institutions haven’t already planned and secured executive sponsorship and budget. Worst case, if they don’t act now, they could find themselves behind by one or even two years.
One recommendation for quickly catching up entails learning and borrowing heavily from other industries that have been undergoing digital transformation for years, including retail, media, and telco. Some retailers, for example, are very advanced in digital business, omnichannel, and APIs.
Another way for banks to quickly move toward compliance with PSD2 and gaining a competitive digital edge is with a ready-made set of banking-specific APIs and tools to help developers build new digital experiences. Apigee’s Open Banking APIx simplifies and accelerates the process of delivering open banking and PSD2 compliance by enabling speedy and secure delivery of banking APIs (Nationwide is using this solution
There’s a lot of work to be done by January 2018. Whether financial institutions are still planning or have already started executing their API plans, Apigee can provide the know-how, technology, and proven execution to help them succeed.
Image: Flickr Creative Commons/MPD01605