May 2016, Gurgaon: The capping of interchange fees will force card issuers to push aggressively into the personal loans market. Consumers show a strong preference for their bank to provide account aggregation services.

Insight on how the PSD2 will impact retail banking by explaining strengths, weaknesses, opportunities, and threats posed by PSD2. Very handy in strategizing steps to ensure compliance with PSD2 regulation and how banks can provide value-added products and services in an open banking environment.

The revised PSD will Standardize, integrate and improve efficiency in the European Union payment system, offering better consumer protection and promoting innovation in the payments space and reducing costs. It lays down clear norms on the use of emerging payment methods such as mobile payments, online payments and other new and emerging payment services into the regulation. It is believed that PSD2 will homogenize pricing and improve payment security across European Union by creating an equal playing field for payment service providers and enabling new companies to get into the payments space.

PSD2 will have a huge impact on the banks requiring a lot of investment on their part for technological requirements and opening up opportunities for third-party players increasing competition. Banks will have to carefully consider their strategy in open banking, with PSD2 on the horizon and the general move towards more open consumer data. In order to have a competitive edge and progress, banks should not view PSD2 simply as a compliance exercise, but recognize these changes as catalysts for accelerating their own digital payment programs.

The introduction and regulation of third party payment service providers (TPPs) are of two types those that offer Payment Initiation Services Providers-PISP and Account Information Service Providers-AISP. PISPs will challenge banks’ “front-of-wallet” position while AISPs can boost customer engagement and also customer acquisition.

PSD2 fundamentally rebalances control over customer data in favor of the consumer and has the potential to undermine customer loyalty by distancing banks from their customers. Banks with an established presence in fintech through incubators and accelerators will be in a stronger position to capitalize upon the opportunities brought about by PSD2.

Key points in the report:

• SWOT Analysis on PSD2 and open banking
• Guidance as to how banks can shape their propositions leveraging third-party providers
• How banks can integrate value-added products and services into their offerings
• Consumer attitudes towards account aggregation
• Fintech solutions covered in monthly FinTrack publication