A revolution is just around the corner. Out of the many new regulations to be faced by banks and financial operators over the coming months, there is one that is less mentioned, PSD2, but the impacts of which shall determine the role of intermediaries – and their relationship with customers – for the years to come.
This is the new European Payment Services Directive, known as PSD2. The transposition of this legislation into national law is forthcoming, set for 13 January 2018, and it will change the world of payment systems as we know it.
The shared goal – yet to be precisely defined with guidelines and technical standards which are still being fine-tuned by the EBA – is to expand and integrate the payments market, harmonising the rules between Payment Service Providers (PSP) and new players, thus making the system more robust while encouraging competition and transparency.
New PSD2 innovations that are potentially most disruptive for the business models of banks and intermediaries include, in particular, the concept of portability of the data relative to the client's current accounts.
Although in the past few years banks have gathered vast amounts of information about their clients, they have struggled to capitalise on this asset. Analysis techniques are still relatively underdeveloped and even when present, they have not resulted in sound and effective support of business processes. Data is collected, but not “monetised”.
And before banks are able to grasp the opportunity, along comes PSD2 and changes all the rules of the game, putting other players, banking and non-banking alike, in the position to intercept, collect and analyse this information.
These are the so-called Account Information Services Providers (AISP), that will be able to connect to bank accounts and retrieve a variety of information, obtaining an overview of a client’s financial situation, analysing their spending habits and providing support in their financial planning.
To have an idea of the dimension of the phenomenon, just consider that in Italy almost 6 million financial decision-makers (i.e. who makes financial decisions within a family), 30% of the whole lot, have current accounts in more than one bank, 2.3 banking institutions each on average (Wealth Insights, Prometeia-Ipsos, November 2017).
Focusing on the 6.5 million Italian households, whose overall financial assets worth more than 100,000 euros and whose recourse to multi and home banking is 2.5 times as much as the others -, the total bank deposits and other such liquid assets that can be aggregated by an AISP amount to 600 billion euros, nearly 1/6 of the Italian household financial wealth.
The stakes are high: we are facing the potential redistribution of the competitive advantage from banks to others, and from large institutions, that thanks to the quantity of information enjoy a potentially greater competitive advantage, to smaller operators.
The key element for the success of these enterprises will lie in the ability to earn the trust of their clients by providing a service distinctive in terms of range, quality and usability. Only in so doing will they be able to persuade clients to grant them the permission to retrieve account data from their banks. This is valid both for 'Over The Top' hi tech giants and for the myriad fintech start-ups entering the market.
Opening the field to new operators could be a risk, however the potential advantages should not be underestimated either: PSD2 could constitute a strategic opportunity for intermediaries to become global account aggregators. That is to say, to provide a platform of services to support clients’ Wealth and Asset Management, combining financial information, transactions, financial and non-financial alike, and customer analytics.
With PSD2 intermediaries have the opportunity to become clients sole providers of needs analysis and associated integrated wealth advisory services.
Such a commercial proposal should be built starting from private clients, whose deposits and current accounts alone amount to almost 150 billion euros.