In today’s data economy in which everything has become a transaction, future relevance for banks is no longer based on payments alone. To help senior executives of banks to start leveraging their Open Banking capabilities in this context, we recommend three must-do actions to holistically address the components of a digital trust infrastructure (digital identity, consent management, payments and data sharing). These actions will enable banks to build much-needed customer relevance, credibility and trust in the digital transaction era.
Payments has historically been an important anchor product for full-service banks to create customer relevance. However, the introduction of PSD2 has brought with it a real threat of increased pressure on that relevance from third parties who succeed in introducing new, value-added products and services. PSD2 has also required banks to develop new technological and operational capabilities (e.g. digital identification, authentication, API infrastructure, developer platforms, support, etc.) and enhance existing ones that can be leveraged in pursuit of new business models in the Open Banking domain.
It is only natural that many banks are initially focusing on their payments strategy and roadmap. They are keen to better understand how the foreseen payment products under the European Payments Initiative (EPI) fit with existing payment solutions and the possible implications of related developments such as payment initiation services under PSD2, Request to Pay and other value-added payment functionalities enabled through Open Banking. Nevertheless, we are keen to remind banks that the newly acquired capabilities can also be used to gain new relevance in an open data economy in which customers are in control of what data is shared from which sources and for which purposes.
Regulatory reforms such as PSD2, Open Banking and GDPR as well as developments such as the EU Data Strategy and the digital finance strategy are democratising access to data assets across the whole economy. In a changing world in which data is emerging as the new global currency and digital transactions are at the heart of everything we do, customers are becoming more aware of the value of their data assets; they want to leverage their data beyond the platforms and organisations that store it in order to tip the ‘data-benefit balance’ back in their own favour. This is driving customer demand for increased transparency and control over their data assets – a concept that is also known as ‘data sovereignty’.
In our previous article we shared our perspective on the future role of banks as data custodians and the underlying beliefs that bank executives should embrace in order to initiate their sustainable transformation. Banks embracing these beliefs have recognised that putting customers in control of not only their money but also their data is strategically and commercially imperative for future relevance.