30th November 2016

The Impact of PSD2 on API Banking

Written by Peter-Jan Van De Venn, Chief Commercial Officer, Five Degrees

On November 25, at the annual BBA Digital Banking Conference 2016, I gave a presentation titled “Marketplace Banking – what will be the impact of PSD2 on API banking?” In this presentation, I spoke about the world of services, marketplace banking, the impact of PSD2 and other regulation. As everyone in the banking world is aware, PSD2 regulation will become active in 2018. This regulation from the European Commission is meant to increase competition in the banking sector. The main highlights of PSD2 are Access to Accounts (A2A) and Payment Initiation Services (PISP) which mean that banks are obliged to share their clients’ account data to third parties. This will open the gateway for new players to make use of the banks’ customer data. In the not-too-distant future, consumers might be using Facebook, Google or other platforms to pay bills and new fintech companies will evolve that aggregate multiple accounts and take over the distribution function of the banks.

In the UK, the Competition and Market Authority (CMA) has identified the need for greater competition in the banking sector noting that larger banks aren’t competing hard enough for customers’ business and smaller banks are finding it difficult to grow. The CMA is now implementing a number of reforms, chief amongst which is that banks must implement Open Banking by early 2018. The goal is to ensure that customers benefit from technological advances that are often introduced by the smaller banks.

The best way to provide third-party providers access to customers’ accounts is through open APIs (application programme interfaces). This allows third parties to build financial services on top of banks’ data and infrastructure. Five Degrees has an open-API banking platform called Matrix that empowers financial institutions to enter the era of modern digital banking. This may significantly change the competitive landscape in banking as different sources of competition enter the sector. Five Degrees sees Matrix as the best hub that connects channels, customers, products, services and the fintech ecosystem. So PSD2 is important to Five Degrees, banks and the fintech industry.

Interested in knowing more? Unclear about what PSD2 means for you? Wondering about the impact of PSD2 on API banking?

You will find answers to these questions (and more) in our recently released white paper:

PSD2: A Marketplace Banking Opportunity – Connecting your customers to a unique ecosystem of services

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