As a leader in API integration, we’re constantly being asked about our vision for a comprehensive PSD2 (Directive on Payment Services) strategy. Banks are making headlines for new, albeit vague, digital products and it’s often difficult for massive organizations to pinpoint where to start on this digital transformation journey. Thus, we’ve put together a few high level variables for identifying, creating a strategy and implementing your approach according to the trendsetters in the industry.
Let’s start with the catalyst for the conversation and review the purpose behind PSD2 for a perspective of the past and digital future of the financial services market- as well as consider the challenges and advantages to the regulation.
Purpose of PSD2:
- Create a safer and more innovative payment ecosystem across the EU
- Make cross-border payments as easy, efficient and secure
- Increase competition and choice for consumers
All three of these points are rooted in stimulating the industry to innovate and update their technology infrastructure, which effectively implies that financial services must implement deep digital transformation strategies. Thus, we’ve seen an increase in collaboration, especially with fintechs, as these organizations engage third-parties to propel innovation in order to stay competitive.
But, staying competitive isn’t as easy as simply creating an open API. We’ve seen thousands of banks and fintechs begin to offer identical services that do nothing more than increase the standards and leave additional room for the outliers to creatively innovate. Few financial services orgs, like MasterCard and PNC, have succinct visions of how to take advantage of PSD2 and they’re achieving this through API connectivity.
For instance, Mastercard knows no boundaries when leveraging their APIs to propel new product features and revenue streams. They’ve pursued IOT integrations with refrigerators to allow for payment through an LED touchscreen. Through eCommerce integrations, they’ve built a refinancing product to serve up uber-personalized financing prompts during the checkout process.
Another example of a trendsetter leading the way in digital transformation is PNC. PNC has overhauled their service-offerings to primarily API-driven products and created a seamless experience for their SME clients with their business suite, Cash Flow Insight. Through a series of integrations and orchestrations, this suite of products offers a comprehensive set of tools to manage everything from automatic invoicing, bill pay, document management, receivables, and financial planning and analysis.
Thus, the definition of ‘value-added features’ has evolved to mean providing relevant, worthwhile value throughout the customer journey. Both Mastercard and PNC have achieved this by defining and pursuing an overarching digital roadmap. And they both fall to the far right of the PSD2 maturity spectrum, as well as the digital maturity spectrum (which we have identified here).
Through these three steps, one can work towards becoming a customer’s preferred digital point of entry into the vast ecosystem of financial services.