Excursus – PSD2 consultations: Feel first, think second, speak last
Banking and FinTech markets are currently faced with consultations on PSD2 content as part of national implementation processes as well as at the EU level with consultations initiated by the European Banking Authority (EBA) on their first Guidelines and Regulatory Technical Standards as mandated by the PSD2.
In attending the latest discussions and hearings, listening to people’s concerns about the outcomes of PSD2 for the overall open banking market and to descriptions of the hurdles we will all have to face beginning in January 2018, I’m becoming more and more worried.
However and in the first place, I am not concerned about technical and procedural details and how a potential Account Information Services Provider and Payment Initiation Services Provider like figo will be able to handle all final requirements. What worries me most is the big picture of current developments.
From my point of view the toughest PSD2 implementation challenge is that market participants find themselves back in increasingly emotional debates over long-finalised PSD2 principles, which entered into force in January this year. As a consequence, I observe with deep concern that this important consultation phase is currently not being constructively used by market participants.
There are only twelve days left (!) to provide EBA with technically and operationally reasonable, and more importantly, user-friendly and market-enhancing feedback on their first but most important mandate for Regulatory Technical Standards on strong customer authentication and secure communication under PSD2. And after months of dedication by FinTech influencers to foster successful cooperation between banks and FinTechs as well as achieving initially welcome results in mindset changing, market participants on both sides (!) are again getting lost in fear, distrust and emotion. As of today we – as an overall European open banking market – have taken one step forward and two steps back. And frankly, I am a bit embarrassed that this time it’s FinTechs in particular who should reflect on their behaviour.
No open banking FinTech was founded to change the world as a non-profit organisation. PSD2 – as it stands today – is a first step, and a huge step, in promoting innovation in that area. From a banking incumbent perspective it is, on first sight, a costly burden. However, banks are gradually realising that PSD2 brings a huge opportunity to provide customers innovative products by making use of open banking themselves. Will this kill the FinTech open banking industry? No! Not if FinTechs actually live up to what they have demanded from banks over the last several years, i.e. a forward-thinking, cooperative and constructive attitude.
So, dear FinTechs, stop cherry picking and take a realistic perspective! You cannot expect to get unlimited access to an EU-wide, consistently designed, and perfectly operated XS2(All)Account(s) Super API in 2018 for free from a laid back and generous banking market – which is currently experiencing serious economic difficulties – without giving in to some extent.
Being constructive and accepting compromises means:
- Providing win-win ideas for practical solutions, such as (just to name few):
- push services by banks instead of pull services from an Account Information Service Provider side for balance changing requests or
- alternatives to overcome user-unfriendly but “last resort” ideas by banks like a 2nd set of account access credentials for third party usage to meet PSD2 requirements.
- Practicing appropriate compliance with data and IT security as well as customer protection requirements.
- Sharing open banking benefits with banks who actually put some effort into building and maintaining their customer base!
If you keep on asking for cherries without making any compromises at all, you cannot be surprised when banks react with mistrust and non-constructive criticism of your demands. So rather concentrate on cooperating with banking incumbents to promote an overall mindset change in the market. You want access beyond the PSD2 boundaries, such as XS2B(rokerage), to serve your own customers? So is your fight against the bank’s screen-scraping resistance your only answer for making this possible? Does a technically smooth API service that provides brokerage account access not sound like a more innovative and worthwhile solution? So why not share your profit and pay banks on a contractual basis for an appropriate premium API access? Only if they benefit from the open banking idea the way FinTechs do and only if all participants are enabled to act in a legally watertight way, can an innovative and growing market be achieved. And regulation will involve itself in due course to meet newly developed market needs.
Speak (and write) last
From a professional as well as a very personal perspective, I believe in Socrates’s principle for successfully fostering change, which is: “The secret of change is to focus all of your energy not on fighting the old, but on building the new.”
So please focus! And the primary focus is on realising that third party providers as well as banks are currently in danger of getting lost in the complexity of PSD2 requirements by getting involved in emotional debates on principles that are no longer questionable after PSD2 entered into force on 12 January, 2016, and the secondary focus is on providing EBA with constructive feedback within the next twelve days!