PSD2 to drive fundamental banking shift within five years.

PSD2 to drive fundamental banking shift within five years.
  • Banker surveys across 19 European regions find over a third think banking will experience a fundamental shift in the next five years
  • More than a quarter say Facebook, Google and Amazon will take the role of the bank within same period; nearly a third think their existing payments channels will be taken over by the same tech giants
  • More than two in five worried about the effects of PSD2 on their organisation; CEOs least worried, CTOs and fintech officers most worried


London, UK: 15 January 2018 – New surveys commissioned by Nordic mobile payment technology provider, Auka, have found many bankers think their organisations will experience a disruptive shift post the second payment services directive (PSD2) which comes into effect today.

The surveys saw key banking decision makers across 19 European regions* answer a series of questions about their readiness for PSD2. The surveys also asked respondents about their future digital channel strategies, particularly with regard to mobile payments.

Many believe that tech giants such as Google, Apple, Facebook and Amazon, will increasingly take the role of the bank over the next few years. Asked whether they believed these outside threats would take the role of the bank within the next five years, 26 per cent of those surveyed said yes. Only 14 per cent said they didn’t think this would happen while 61 per cent said they weren’t sure.

If not the whole bank, then just the payment channels. Almost two-thirds (78 per cent) answered they either didn’t believe (31 per cent) or didn’t know (47 per cent) whether their existing digital banking channels would withstand competition from the same companies.

Under PSD2, banks are compelled to provide API access to licensed third-parties. This means that any licensed company with a payments solution can go direct to the customer and get their permission to aggregate their bank account data.

Daniel Döderlein, CEO and founder of Auka, says that the likes of Google, Apple, Facebook and Amazon (and so on) who already have billions of engaged users, know the power of user data.

“In late 2017, we witnessed the rapid adoption of Tez, Google’s payments solution, in India. They were able to launch it there because similar legislative changes to PSD2 were implemented in the region. “When they’re able to offer flexible and innovative payment solutions to their customers in Europe, post the regulatory technical standards (RTS) implementation phase of PSD2, we’ll see a landgrab for the most customers as quickly as possible by the tech giants.

“Once a company has hundreds of thousands or millions of customers using their payments solution, they can easily make a lot of money by charging third-party fees, launching and upselling other financial services and providing loyalty and marketing insights to other companies.”

When asked more generally about whether they saw a fundamental shift in banking taking place within the next five years, more than a third answered that yes, they did anticipate this (35 per cent), while 43 per cent said no and a further 22 per cent said they weren’t sure.

While many respondents acknowledged that upcoming regulation would have an impact on their organisation, two-thirds (66 per cent) stated that they didn’t believe their organisation would have to adapt or significantly shift its model to retain relevance. More than three-quarters (76 per cent) said they didn’t think their role would need to change.

Asked if they were worried about the overall effects PSD2 would have on the organisation as a whole, 42 per cent said yes. CEOs were the least worried (66 per cent said they weren’t worried) whilst CTOs (44 per cent) and fintech officers (46 per cent) were the most worried, on average.

Daniel Döderlein believes that the results of the survey suggest a lack of readiness for what’s to come in banking across the EU.

“The results indicate a collective cognitive dissonance amongst those who’ll be the most affected by PSD2. On the one hand, there is a consensus that change is coming, on the other hand, there seems to be a general belief that no organisational change is required.”

“This bi-polarity seems to be a result of the lack of vision, lack of belief that their organisation has what it takes to change, turn around and utilise the opportunities that they clearly believe Facebook will be able to. This couldn’t be further from the truth. In order for banks to compete against the likes of third-party disruptors, they will need to pick apart their models and create innovative payment solutions that people want to use.

“Banks have a great advantage over Facebook. They know how to handle payments and they know security. What they lack most right now is an understanding the opportunities”

“Nordic banks have shown its possible for banks to own brilliant payment systems. They’ve already saturated the market with mobile payments apps, built into bank driven eco-systems much like that of AliPay. In fact, they have surpassed the success of AliPay in terms of market adoption. A blueprint has been made. A recipe for success is available. If I was the high commander of a European retail bank, I would not look away, I would order my army upon their horses and go to war!

“I think it’s dangerous to dismiss these findings as banks in some parts of the world have already proven that change is possible and that the rewards of adaptation for doing are greatly underestimated. What most banks have been doing until now hasn’t been cutting it. It’s this same complacency that sparked the need for PSD2 in the first place and if banks don’t adapt, they will eventually be replaced and die,” says Döderlein.

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