Are PSD2 and Open Banking a threat or an opportunity for banks? It’s the question for which everyone would like to have the right answer.
But before trying to answer that, we must understand what PSD2 and open banking really means. Often associated, sometimes the two get confused, but they are different. The difference is that whereas PSD2 (the European legislation known as the second Payment Services Directive) requires banks to open up their data to third parties, Open Banking means that they do so in a standard format.
For us, in Banco BNI Europa, PSD2 not only means new obligations but also great potential and development opportunities for the future. What many haven´t realize is that like third-party providers (TPPs), banks can also use the data of other banks for innovative product offering – if they have implemented the digital infrastructure.For a Challenger Bank like us, that’s a path that we want to follow in order to reinforce our role as a leader in the Fintech generation.
With PSD2, the European Commission aims to improve innovation, increase consumer protection and improve the security of internet payments and account access. PSD2 introduced two new types of players to the financial landscape: PISP and AISP. AISP (Account Information Service Provider) are the service providers with access to the account information of bank customers. Such services could analyse a consumer’s spending behaviour or aggregate a user’s account information from several banks into one overview. PISP (Payment Initiation Service Provider) are the service providers initiating a payment on behalf of the consumer. P2P transfer and bill payment are PISP services we are likely to see when PSD2 is implemented.
Therefore, when PSD2 becomes implemented, banks’ monopoly on their customer’s account information and payment services will disappear and that will change the traditional banking landscape. Banks will no longer compete against each other’s but with everyone offering financial services.
In fact, with PSD2, bank customers, both consumers and businesses, can use third-party providers to manage their finances, while still having their money safely placed in their current bank account.
At the same time Banks are required to provide these third-party providers access to their customers’ accounts through open APIs (application program interface).
This will enable third-parties to build financial services on top of banks’ data and infrastructure. They enter in the market with new ideas about how to shape the banking experience but also without the heavy compliance and infrastructure which banks are required to maintain.
To be more precise, one of the most important points covered in PSD2 is XS2A (Access to Account) that allows third parties to access bank accounts to get customer data – only when the customer gives their consent – such as bank account balances or transaction history.
To explain it in a simpler way, at the moment, if you’ve got accounts with two different banks, you have to look at them separately, because the banks’ systems are incompatible. With PSD2 the new players will let you see them at the same time, which should make it easier to manage your money.
On the other hand, when you take out a loan, you have to show details of your finances to prove you’re good for it. PSD2 will let you provide that information online – for instance, by giving an investor one-off access to 12 months income and spending history.
For banks, PSD2 poses substantial economic challenges. They will lose not only revenues obtained for payment services, but also IT costs will increase due to new security requirements and the opening of APIs.
To fight against it, and at the same time going towards customer expectation and increased digitalisation, many banks start collaborating with Fintech, focusing on customer centricity and setting up innovation labs.
In fact, with PSD2 we are moving from banks to banking services.As Bill Gates said back In 1990, Banking is necessary, banks are not.
Banks and start-ups see an opportunity and are already building apps, usually dashboards where you get a view of your ingoing’s and outgoings.
Consumers become more digital and mobile and they are asking for financial service offerings that are faster, less formal, more personalized, easier to access and cheap. So far, non-banks have proven to meet these requirements in a more innovative and human-centric way than many traditional banks and costumers are starting to use them, instead of using traditional banking in day to day transactions. That explains, for instance, the increase use of PayPal.
Competition within the financial sector will increase, with banks find difficult to differentiate themselves in traditional services, due to the introduction of PSD2, technological innovations and changing customer demands.
There are several reasons for this. One is, that new entrants in form of non-banks will get easier access to the market after PSD2. The regulation removes some entry barriers to the financial market, and hence, more competitors are likely to emerge. Furthermore, customers can easily choose new financial service providers with the introduction to PSD2. This means, that customers will be enabled to create their own collection of smaller service providers instead of choosing one specific bank for all financial needs.
To move forward, we need to adapt to PSD2 as soon as we can. Being a small bank and wanting to make a difference in the banking system, we, as a European challenger bank we entered into a strategic partnership with NDGIT the provider of the first API platform for banking and insurance in Europe. With “PSD2 Ready”, NDGIT, the technology leader in the field of API management offers a complete solution that can be used immediately allowing Banco BNI Europa to be ready for the PSD2 challenger in a record time.
NDGIT product “PSD2 Ready” offers ready-made APIs with all functions for PSD2 and regulation are already included, from third-party management to PSD2 reports. The software can be flexibly configured for all requirements of complex banking IT and can also be adapted to the various options of the API standards and authorization options.
As mentioned before,at Banco BNI Europa, we see PSD2 not only as new requirement for Banco BNI Europa, but also as a opportunity for the future as we want to reinforce our role as a leader in the Fintech arena.
UBX appoints new Chief Investment Officer
In line with its strategy to explore and invest in companies and platforms of the future, UBX—the Fintech and Corporate Venture Capital arm of Union Bank of the Philippines (UnionBank) — is announcing the appointment of Matthew Kolling as the company’s Chief Investment Officer (CIO).
As CIO, Kolling will be managing UBX’s Corporate Venture Capital (CVC) fund. He will also play a key role in raising capital for UBX while assisting the company in key corporate transactions, including the structuring of joint ventures and acquisitions.
Prior to his appointment at UBX, Kolling has been Head of Venture Investments at Aboitiz & Company since 2019, wherein he had been working with UBX on investment portfolio decisions. Before that, he held senior positions in Private Equity, Venture Capital, and Investment Banking at firms such as Providence Equity Partners and Morgan Stanley in New York.
Kolling has more than 20 years of experience in managing investments and deals in the Technology and Telecommunications industries and is active in Venture Capital and startup communities in the Philippines and the Southeast Asian region. He currently chairs the Manila Angel Investors Network, among others.
“We at UBX are excited to welcome Matt as our new CIO. We firmly believe that Matt will be instrumental in driving value creation opportunities, both within the CVC fund and our corporate ventures. We look forward to working with him as we fulfill UBX’s vision of a future where banking services are embedded into everyday experiences that matter,” said UBX president and CEO John Januszczak.
Meanwhile, UnionBank president and CEO Edwin Bautista said, “The addition of world-class talents in our pool reinforces our strategy to future-proof the organization and our business as we prepare for many new opportunities that come with the changing times.”
It’s all relative: Older generations feel helping out the family financially is more important since the Covid-19 outbreak
Before Covid, 23% of people prioritised helping younger generations out financially, that increased to a third as a result of the pandemic
A recent survey* conducted by Hodge has revealed that the Covid pandemic has led to more people wanting to help younger family members financially.
A third (31%)** of those questioned said that since the Covid outbreak giving a financial gift to children or grandchildren is more important to them, compared to 23% who said it was a priority before the pandemic.
The traditional “Bank of Mum and Dad” is still very much open for financial help, with parents being responsible for 72% of the gifts, but the study also revealed that financial gifts can come from all corners of the family – including children (14%) and siblings (14%).
The survey also found that a third of people have received a financial gift from family, with those aged between 25-34 as the most likely to receive
The most popular reason for gifting money to family is for special occasions such as a quarter of gifts were given for weddings and birthdays but 11% of people have received money to help with big purchases such as cars and houses. In addition, 19% of people have received help with day to day finances, with around 14% of those receiving a gift have done so to pay off debt.
Emma Graham, Business Development Director at Hodge, said of the research: “Our study showed that, as a nation, we all want to help our family out when it comes to money. And whilst we all think of the Bank of Mum and Dad or Gran and Grandad as a traditional source, we were surprised to see that 14% of brothers and sisters are also helping out.”
The findings come from a recent intergenerational study conducted by Hodge, who interviewed over 3000 people about their attitudes towards finances and their aspirations for the future. The full research findings can be found at https://hodgebank.co.uk/2020/05/19/money-its-all-relative/.
As part of the study, people were also asked about paying back the gift, with 40% of beneficiaries expecting to pay their parents back, but this dropped to 28% if the gift came from grandparents.
From the gift donor’s perspective, 26% expect the gift to be paid back, however just 15% of grandparents expected the money back.
Hodge has produced a set of guides on how families can navigate the tricky subject of giving financial gifts within a family, as well as the considerations and steps that be families should think about taking before a gift is given, such as is it a loan or a gift and thinking about contingencies if the family member’s circumstances change. The guides can be found here: https://hodgebank.co.uk/news/
Emma continued: “It’s clear that families feel strongly about offering financial support to each other if they are able and this has increased since the Covid pandemic. Before Covid, 23% of people prioritised helping their families out financially in the next five years. Since the Covid-19 outbreak that has increased to a third of people saying helping a family member financially had become more important.
“So, it is clear that the Covid-19 lockdown and subsequent predicted economic downturn, has led to more families looking to share wealth to help younger children or grandchildren during this difficult time. Many people may look to Later Life mortgages, where many products have reduced their rates and have flexible lending criteria, to help out a loved during these difficult times.”
New report identifies the factors which will determine SMEs’ chances of a successful COVID recovery
· Analysis of the performance of over 1,000 UK small and medium-sized businesses by Allica Bank provides roadmap for SMEs
· Regular training, an openness to innovation, and a clear vision all contribute heavily to an SMEs’ chances of success
· Allica Bank has launched a programme of free workshops to expand on the findings and support business owners
Business bank, Allica Bank has combined data and insight from over 1,000 UK SMEs with a multiple regression analysis to determine what factors most closely aligned with an SMEs’ chances of success and separated the highest-performing businesses from their peers. These ‘rules for success’ have been compiled from the research data to support British businesses as they look to chart a course to post-Covid recovery.
The full report identifies six behaviours for small and medium businesses to follow, to maximise their chances of a successful COVID recovery. The six top-line rules emphasised by the data were:
Rule 1: SMEs should regularly train staff
Of the top-performing businesses analysed, 47% provided training for employees at least on a quarterly basis, compared to just 32% of other businesses. Regular employee training was linked closely to success by the model.
Despite this, many small businesses have neglected training and nearly half (46%) of the small businesses analysed only provide training for employees about once a year or less often. This included 15% that never provide employer-funded training. This discrepancy could represent a significant opportunity for small businesses to unlock the potential of their employees and thrive in the post-Covid economy.
Rule 2: SMEs need to focus on innovation and technology
Looking again to the best performing businesses, 76% were found to either continually (39%) or often (37%) be considering new opportunities for technology in their business. This is compared to only 51% for businesses considered to be outside of the top ranks, out of which only 27% admitted to continually looking for new technology opportunities.
Rule 3: Small business must have a formal, long-term vision
Nearly two thirds (66%) of the most successful businesses in the survey had a formal, long-term vision, compared to just 50% of businesses outside the top 100. Looking to the businesses that scored the lowest on the SME Performance index, only 37% claimed to have a formal, long-term vision.
Rule 4: SMEs should broaden their customer reach and find new markets
Of the top-performing businesses, 65% of these have overseas customers compared to just 40% of the worst performing businesses. Among the best performing SMEs, over a third (34%) identified international expansion as one of the top three drivers for their success.
Rule 5: SMEs need to develop reinvestment plans
22% of the best performing SMEs reinvested some of their profits into the business in the past three years with an average 9% of profits being redeployed. Tellingly, this is nearly double what other businesses admit to reinvesting in their business (5%).
Rule 6: SMEs should engage with local business organisations and networks
Of the top 100 SMEs, 30% had obtained external credit to expand over the past three years (compared to 24% of other businesses). Meanwhile, only 16% of all other SMEs had engaged with local enterprise partnerships or growth hubs in the past three years (compared to 23% of the top 100 SMEs).
Chris Weller, Chief Commercial Officer, Allica Bank, said:
“All small businesses are different, as are all small business owners, but one trait they share is an innovative resilience. Whilst the coming months and years will undoubtedly continue to present extreme challenges, there is no doubt that small and medium sized businesses across the UK will rise to meet them head on.
“To give them the best chance to succeed, though, they need to be equipped with the right tools. There is certainly no silver bullet or panacea for every small business, but as this study has found, there are a number of common factors found in the most successful businesses that allow small enterprises to thrive and that they can consider individually for their business.
“This research has identified common ‘rules for success’ that speak to every aspect of running a business, not just the financials. Once we saw these results, we wanted to use them to help small businesses begin to re-build and prosper, by outlining common factors and then examining how best they can be practically applied to businesses in all sectors of the economy.
“Small business owners and their employees have been hit hard by the crisis, but they have the drive and resourcefulness to breathe new life into the economy and bring energy to post-Covid Britain. Our commitment at Allica Bank is to give them the support they need to do so, every step of the way.”
The full report contains a wealth of additional data and insight into each of these topics. As part of its mission to empower small businesses, Allica Bank is making the findings freely available and running a series of free online workshops with relevant partner organisations for businesses to attend.
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