How is open banking going to change banks and their services?
According to experts’ estimates, open banking, initially introduced on 14th September by the EU directive PSD2, is going to change the face of the financial industry within the next 10-15 years – by improving competition, enabling more than just traditional entities to provide services.
Improved security when accessing the account
- The EU directive PSD2, which entered into force on 14th September, is first and foremost about improving authentication in digital banking.
- The new requirements are also there to protect the clients of the so-called open banking.
- The access to payment accounts will be given to licensed third-party entities
That’s because directive PSD2 lays down that, with the client’s consent, banks are to give access to their payment accounts to licensed third-party entities, which are other banks, creators of financial software and applications or payment services – referred to as TPPs (third party providers).
What are the benefits of online banking?
The directive makes two things possible:
- the first is access to account history in online banking,
- the second is being able to initiate payments from the account.
The impact of those regulations on how we use banking services is going to be enormous, but only long-term. The experience of other countries, such as UK which implemented open banking in January last year, shows that the first 6 to 12 months are the learning stage, the time of improving customer experience and looking for new applications. Then the number of new services just keeps growing faster and faster.
Expanded area of consulting related to savings and expenses
There’s also a new area of consulting related to savings and expenses, which is made possible thanks to the access to the account expense history. British banks help their clients save money by suggesting when to change the providers of services for example. For now, it is mostly about utility payments: gas, power etc., but this type of consulting can be applied to all kinds of expenses. The open banking services are used by nearly 10 percent of clients in the UK by now.
Growth in the so-called value-added services related to a bank account
According to a Deloitte expert, the area of biggest changes will be related to the so-called area of value-added services.
It’s a growing category of services related to everyday payment activities, such as buying public transportation, airplane or movie tickets, hailing a taxi, ordering food, or paying the parking fee. There are markets, like in Hungary, where these types of services are provided by entities affiliated with banks. The Hungarian start-up Simple – launched by Hungary’s biggest bank OTP – provides those and over a dozen other services, and has twice as many mobile clients as its parent bank.