October 18, 2017

New EU directives drive innovation in the financial industry

Charlotta Wark

Head of Financial Digital Channels, Tieto

The financial sector will be disrupted by four key factors. Each of which I am discussing in separate blog posts. In this blog, it is time to look closer at how the new directives from the European Union (such as PSD2) will open up a flood of changes for the banking industry.

  • New and disruptive technologies
  • New directives from the European Union
  • Industry convergence and SPEED
  • Changing customer buying behaviour and the new sharing economy

The end of the information monopoly era

The goal of the new directive is to increase innovation in the financial services sector. This to heighten security for digital payments, and to make information within the European Union accessible. In short, this means that banks will have to share information about their customers’ accounts by open APIs. This means the end of the monopoly banks have had on customers’ financial transaction information.

This in turn will open up the opportunity for new players to enter the market with tailored and niched offerings. Two types of companies will challenge the traditional service providers in the financial industry. First, we have the niche players whom with very tailored and specialized offerings will be able to provide a new level of service to the customers. Secondly, we have the well-known “Big Logo” companies that already have credibility and trust in their valuable brand name such as Google, Facebook and Apple.

New financial eco-systems are being created

Today, many Swedes “Swish” money to their friends to pay off micro loans. Siirto is making real time payment a possibility in Finland right now. Soon we may “Apple” the charge of a bus ticket or “Facebook” the payment of a tailored insurance policy.

This fragmentation of the value chain will continue to create new financial ecosystems and industries will start to converge. A good example of this is the payment eco-system Siirto that I mentioned above and which was launched by Tieto and Automatia last year.

The Financial Services institutions that see the work with PSD2 and GDRP only as a way to keep up with the new regulation will probably end up on the bottom half in the winning game. Those who see the work with the new regulations as a motor and an excuse to invest in innovation will come out on top, as winners.

The clock is ticking and the traditional banks and insurance companies will have to deal with this new world of open APIs and consumer friendly challengers. The new PSD2 regulations will become a reality already in 2018.

This quickly brings us to the third of the four key factors: SPEED. I will be back soon with a blog post where I share my thoughts on industry convergence and speed and how this adds to the perfect storm that once and for all will change the financial industry.

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Read also my previous blogs:

Batten down your hatches; a perfect storm is brewing over the Financial Services Sector

New and disruptive technologies changes banking – starting now

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