At present, the banking outlook has transformed radically. The consumer log-ins to internet banking increased by 10% between 2014 and 2015. There was also a 6% decline in branch transactions.
The modified Payment Services Directive (PSD2) is resulting in substantial changes to the payments environment and it would impact all stakeholders. It would also enhance user experience.
The latest regulation issued by the European Commission has high expectations. Its objective is to place the customer and the security at the nucleus of the electronic payments process.
However, several financial institutions would have to make significant investments in system and process upgrades to be able to adhere to this revamped method.
Legacy technology and practices denote that for several institutions, a huge investment is needed to facilitate the required upgrades, risking present revenue streams and brand image.
For new players, with less inconvenient systems, PSD2 provides an opportunity to outperform the less skillful traditional players.
Technology partnerships could enable close the generation gap for several financial institutions, with almost no disruption to daily activities. An efficient identity verification (ID&V) process is a vital aspect of positive customer interaction online and PSD2 perceives and encourages this.
The ID&V process should happen in a way that inspires trust with negligible consumer disruption.
As most ID&V processes depend on the compliance of the consumer it is crucial not to overlook the effect of ease and familiarity in the process.
The directive seeks to facilitate faster and smoother transactions and improved security. It broadens consumer choice and reduces transaction fees. It has another very worthy reason – opening up the complex European market.
PSD2 would place consumers back at the nucleus of personal banking. The digital revolution has placed the power of choice in the hands of consumers. Banks would have to recognize this and react accordingly.
PSD2 aims to standardize security across a shifting landscape, increase consumer security and include emerging payment technologies into the present standard. However, this provides a critical challenge for traditional banks.
PSD2 should not be regarded as an obstacle to banks. It should be viewed as an opportunity to rethink, redesign and renew.
The future of banking is at a crossroads and initiatives like PSD2, and its focus on a level playing field gives the opportunity for banks to offer the next generation of banking to its customers.