Beyond PSD2: Being proactive in the age of open banking
June 25, 2019
Reza Rahmani Fard, Head of Payments Marketing at FIME
Open banking isn’t just a European pursuit. For those under PSD2 – the European regulation mandating banks to open-up their back-end to third-parties – the urgency to deliver these services is clear. But players further afield shouldn’t avoid joining the trend or championing the real objective of PSD2 in their strategy – facilitating more valuable and engaging consumer experiences.
Consumer demands are only set to get higher, meaning the need to deliver more valuable services, strong customer authentication (SCA) and open-access APIs will soon become ubiquitous – even if not legally mandated.
From the Middle East to North America, many banks have already begun their open banking and digital transformation projects in a bid to get ahead. But such transformation projects entail significant technical complexities and strategic challenges. Banks need to be smart to remain competitive – so how can they best prepare for success?
Delivering open-access accounts and new digital services will be heavily applauded by consumers. And the rewards are high for moving quickly, engaging new and existing customers. But agility must be balanced with trust.
Defining a comprehensive and effective testing roadmap can ensure trust is built-in to new open API initiatives from the start. Effective planning also minimizes unexpected delays to service launch, ensuring a quality, fully functional and interoperable service is launched on time and on budget.
For those facing regulatory pressures, consultancy can be invaluable in understanding these legal constraints and compliance hurdles without huge internal investment. Not to mention advising how to best monetize these new APIs – balancing initial investment costs with the pressure to generate short-term revenues.
Flying solo or working together?
There are different approaches to open API development. Resource can be invested internally to develop a new tailored API, or a number of API standards and external ‘hubs’ can be reviewed. These initiatives have proved popular in recent years, pooling resources and streamlining the launch of open APIs.
One example in France is STET’s definition of an open banking API standard. Developed with support from FIME, the protocols enable banks and application developers to ensure regulatory compliance, security and seamless interoperability – all at a considerably lower cost and greater efficiency.
FIME has actively engaged in payments industry standardization efforts for over twenty years and is now helping banks and payment stakeholders effectively evaluate the different initiatives across the globe.
Driven by Fintech innovation and rising consumer demands – we are in an era of pure digital transformation. From branchless banks to mobile-native services and cross-platform integration, banks need to create more flexible business models to remain competitive.
When evaluating new payment platforms and form factors however, it’s important for banks to consider whether investing to compete is more valuable than collaboration with – or even acquisition of – new players.
With rising demand for stronger customer multi-authentication methods too, issuers also need to review new technologies and protocols such as biometrics, risk-based and EMV® 3D-Secure. Prioritization is key to remaining flexible, responsive and competitive.
Trust, efficiency and agility are needed to compete in this rapidly changing and exciting market. But as with any digital transformation, the benefits of early-mover advantage also come with high complexities, both technically and strategically.
Partnering with leading experts can help take the strain of understanding how best to take advantage of open banking and maximize ROI. Plus, with so many new, sensitive and technical complexities to consider, a testing expert working at the centre of innovation can be considerably more cost-effective and agile than trying to source in-house expertise.
FIME is supporting both banks and third-party providers (TPPs) globally to define, design, deploy and validate their open API strategy and digital transformation projects. Learn more about our open banking services here.
*EMV® is a registered trademark in the U.S. and other countries and an unregistered trademark elsewhere. The EMV trademark is owned by EMVCo, LLC.
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