„Bank diversity in the conflict between innovation and economic efficiency“

Bank diversity in the conflict between innovation and economic efficiency

POSTED ON 06. November 2018 BY JAN BRINGEZU

Continuous decline in the number of German banks and savings banks

According to the German Bundesbank, there were 1,823 credit institutions (banks and savings banks) in Germany at the end of 2017; compared with 2007, this represents a reduction of almost 20 percent.

According to the Savings Banks Association, the number of savings banks alone has fallen to 385 (a decline of 28) since 2015. The reduction in the cooperative financial sector in the same period was actually 106, down to 915. The Federal Association, BVR, is expecting further mergers, although at a lower level this year, with a total decline of the number of institutions of 57.

For example, in recent years the number of mergers among savings banks has risen significantly. The drivers are, of course, digitalisation, and also the increasing regulation in the financial environment and demographic developments. It is interesting to note that the total number of savings banks fell from 594 in 1998 to 390 as at 31 December 2017 – without one institution being closed.

The numbers of the past therefore speak a clear language; this is further reinforced by the ongoing reduction of branches in Germany. On the one hand, this is also a reaction to the digital transformation and the resulting less and less stringent requirement of the branch as an information and distribution channel. The digital offerings of banks and savings banks (or alternative marketplaces such as Interhyp, Finanzcheck or Zinspilot) are increasingly becoming the primary “banking channel”. On the other hand, Germany, as one has been reading for years and years, is overbanked. In my opinion this applies especially across all institutes, especially for the number of branches (ok, less and less in rural areas …). It is still not uncommon for three branches of an institute to be found in one street of a major German city.

What’s the next step?
How will the trend develop in the future? Will there be a further development or will the “bank dying” continue? Just by the way: no savings bank or cooperative bank has gone under so far; there has only been mergers within the respective banking group, and only very few can remember the last demise of a relevant private bank – since 2001 the deposit guarantee fund had to bear the costs for only 10 insolvent banks, the last was the Dero Bank in February 2018?

Management consultancy Oliver Wyman paints the future of German credit institutions completely black; it assumes that, due to the increasing importance of FinTechs and the large IT groups such as Google, Apple, Amazon and Facebook, the number of German banks could fall by 2030 to 150.

There have been intensive discussions in (not only) the social media about the prediction of the colleagues and one can think what one wants of the lurid lead story, but all are unreservedly of the opinion that the number of banks will continue to decline. The experts, however, are not in agreement about the consequences of an ever-decreasing diversification of the German banking landscape, and the question should also be put as to whether a merger of two (or possibly several) institutions would solve the fundamental problems that drove these institutions into considering a merger in the first place.

At the moment it is being hotly debated, and some politicians, economists and media even demand that a merger between Commerzbank and Deutsche Bank should come about. The question of the meaningfulness is therefore more important now than ever. This question will be explored in the following with the help of a few (yes, even provocative …) theses.

Does a merger (or a takeover) solve fundamental problems for German banks? What problems does a merger cause?

Thesis I: Mergers do not pay off
There are examples where it is worthwhile for one bank to be taken over by another (or where it is planned that it will pay off …). A current example is the takeover of Düsselhyp, which is currently being wound up, by Aareal Bank. Although this example is not really suitable, as Aareal has no strategic interest in Düsselhyp, but only wishes to exploit positive one-off effects within the framework of the settlement.

In reality, however, the situation is different for real mergers and acquisitions. You only have to think of the ongoing attempts to create a uniform IT platform at Deutsche Bank; Postbank is still largely running on its own. The Magellan project, which was supposed to create the basis for a uniform platform, was stopped by the bank.

The creation of uniform and integrated IT systems is always connected with the change of IT systems and the requirement of process adaptations and data migrations. Although the reason for the change in the core banking system of apoBank (from Fiducia GAD to avaloq) is not a merger, the estimated costs (“low three-digit million range”) serves as a benchmark for the IT consolidation of an institution to be merged. You don’t have to look very far for further examples, you can find them in all sectors of the German banking landscape.

If one now thinks about a merger of Deutsche Bank and Commerzbank, then a merger can only pay off with a uniform IT platform; and here neither bank has a uniform infrastructure when viewed individually. Rather, in a merged institution, components of Deutsche Bank, Commerzbank, Postbank, the former Dresdner Bank and other subsidiaries of both banks would then be found. … This list could be extended to include the fact that the Commerzbank will soon have its securities business handled by HSBC and payment transactions by equens, but the Deutsche Bank is taking a different approach here.

It is difficult to imagine a scenario in which such a mammoth task could ever pay off. Especially since the longed for (at least) European champion for many years would be almost exclusively concerned with itself. A fitting transition to …

Thesis II: Mergers are innovation killers
Innovations have a hard time during a merger project, because the securing of the set goals (standardisation and streamlining) is the highest priority after the securing of the daily business. Innovations (in the eyes of many bankers still only betting on future earnings) are not given sufficient attention and are repeatedly put on hold in such phases, which often means nothing more than their discontinuation.

And even after a merger has been completed, things will not necessarily get any better. There are voices (among others, the well-known “influencers”) that yearn for a comprehensive consolidation of the German banking landscape, in which only a few banks would then have plenty of time, money and leisure to finally devote themselves to the creation of innovative solutions for their customers.

I think this is a misconception; competition is a driver of innovation. If market shares are only distributed among a few providers, banks will become more and more comparable in what they offer. In addition, for reasons of convenience, there is increasingly less the need to win new customers with innovative ideas. Evidence of this is that in recent years innovative ideas have come from the diverse FinTech environment and less (or not at all?) from established banks.

The comparisons repeatedly made with countries in which there is more limited banking diversity are not accurate. A BBVA or an ING is not innovative because there are fewer banks in its markets, but because the structures and the reduced importance of (association) “politics” make it possible (and the entrepreneurial DNA dictates it to them).

Thesis III: Mergers deprive local banks of their regional roots
Regional institutions, and these are in particular (but not only) cooperative banks and savings banks, are defined above all by their connection with (the people and institutions of) their region. This is reflected in the social commitment (e.g. the support of sports and cultural facilities or the supply of structurally weak regions) of these houses and in the loyalty of customers to their banks through generations.

But what is the increasing wave of mergers between savings banks and Volksbanks and Raiffeisenbanks in the region in recent years doing with the people? Suddenly the people in Flensburg and North Friesland have a joint savings bank and the customers of the Volksbanks in Frankfurt, Griesheim and Maingau have a new large joint institute. Will there still be room for regional roots after such mergers? This does not always happen silently; for example, there is a petition to reverse the merger of the savings banks Schweinfurt and Eastern Lower Franconia. The integrity of many houses is no longer guaranteed by the dilution of the regional principle.
These three theses are not intended to present mergers between banks as meaningless, as there can be very good reasons for them. Mergers can serve to save banks and thus to achieve economic stability. Mergers can also make strategic sense. However, there are no automatisms that mergers or acquisitions are always worthwhile; two weaknesses do not make a strong one. The weaknesses of the individual partners (e.g. IT legacy, lack of innovative strength, no future-proof business model) will then only be merged and, possibly, further exacerbated.

A Plea
This contribution is intended to be a plea for maintaining diversity in the German banking market. It would continue to be desirable to have large and small as well as regional and international banks. Traditional institutions and challenger banks, multi-channel and mobile only, investment banking and sustainable banking … everything should continue to be typical for our banks in the future!

„PSD2 – A race against the clock?“

PSD2 Richtlinie

„PSD2 – A race against the clock?“

POSTED ON 28. August 2018 BY JANA SCHNEIDER

What banks should consider for timely implementation.

On 13th January, 2018, the PSD2 came into force and has been the law since then. But there can be no talk of relaxation among banks in Europe, because there is still a lot to do. The regulatory standards for strong customer authentication and common and secure communication, RTS for short, issued by the European Banking Authority (EBA) give financial institutions 18 months to implement them. That sounds like a lot of time, but the first impression is deceptive.

The core element of the RTS is the requirement for an interface for the connection of third-party payment service providers, which include payment initiation services (PIS), account information services (AIS) and payment service providers who issue card-based payment methods. If you do not want to give third-party payment service providers, also known as TPPs (Third Party Providers), access to customer accounts through regular online banking, you have to build a dedicated access interface.

So far so good. However, the challenge is not necessarily in the implementation itself, but above all in the rather ambitious timetable of the EBA. Implementation deadline for the RTS and its associated interface is 14th September, 2019, 18 months after the RTS was published in the Official Journal of the EU. At least that’s what you’ve always thought…

But the first date on which the payment institutions have to work is 14th March, 2019, already half a year earlier! The account-providing payment institutions must provide the TPPs with a test environment including support six months prior to Go Live, because the whole thing should be tested properly and work properly. The FinTechs were able to assert themselves in preliminary discussions on the RTS at the EBA with their demand that the new PSD2 interface must have the same performance and availability as existing customer interfaces (for example, in online banking) – keyword prohibition of discrimination.

But that’s not all. If banks think they have until September 2019, at least for the completion of their interface in live operation and for all the associated organizational measures, they could, in the coming weeks, experience a rude awakening. BaFin has not yet communicated a concrete date, but if a bank wishes to receive the waiver of the establishment of a fallback access in case of unavailability of the actual interface, we believe it should rather consider a Go Live by 14th June, 2019, at the latest. The date has already been mentioned verbally by the authorities at one point or another. One of the four prerequisites for not having a fallback scenario at hand is the evidence of at least three months of widespread use of the interface by the TPPs in live operation. Thus, you will end up in the next year of June as a milestone for the provision of the interface; Banks and FinTechs will therefore only have 10 months left to implement the requirements. Is this already clear to anyone on the market? Our feeling tells us that not all institutions are aware of the seriousness of the situation. And what is the consequence if the interface is live on time, but no TPP uses the interface during the three months? That can happen, at least to the smaller houses. The EBA already has an answer for that, too. In this case, the institute must prove that it has done everything in its power to communicate the availability of the interface to the outside, to actually advertise it. For example, through an appropriate publication on the homepage, via social media channels or in another suitable network. So let’s wait and see, as to how it looks later in practice.

In addition to the tight schedule, there are a few more obstacles that need to be overcome. A controversial topic, for example, are the possible business transactions that a PIS may trigger for the customer via the interface. The opinion of the German Banking Industry Committee (GBIC) and among the associations and institutes was so far that standing orders and date transfers do not fall under the PSD2. The EBA sees this very differently and has clarified in its Opinion on RTS on 13th June, 2018, that a PIS may trigger exactly the same payment transactions as the customer himself. According to the latest information, that apparently are based on an exchange of the GBIC associations with BaFin for the implementation of the RTS at the end of July, the BaFin will follow the EBA’s opinion and institutions should therefore also include standing orders and date transfers in their scope if they have not already done so. Depending on the system landscape, this change is not an easy task for the banks. The good news is, however, that only the creation and deletion of a standing order, not the processing or the suspension of the standing orders, must be made possible by the ZAD. An inventory report against the KID is neither necessary for standing orders nor for scheduled transfers. Direct debits remain unaffected by the PSD2.

The Opinion, among other things, made it clear once again that the AIS must be granted access to the same account information that the customer can also see through its online access. This is nothing new. But now this information should also be made available to a PIS on request. Namely, when the bank has batch booking in use, which probably applies to the majority of all banks in Germany, and thus the PIS cannot confirm immediately upon payment initiation that the payment has been posted. With the help of the account information, the PIS should be enabled to assess the risk of a default on their own. But how should that work in practice? Does the payment initiation service then have the dual role of the PIS and AIS in the transaction? Does the bank still need to give it access to the account information without the customer having to do another strong customer authentication? Or do the same requirements and the 90-day rule apply here as in the classic PIS?

There is still a lot of need for clarification. We will continue to follow the latest developments and publications by EBA, BaFin and GBIC with eagle eyes and keep you up to date.

„3D Secure 2.0 – Facelift or Quantum Leap?“

„3D Secure 2.0 – Facelift or Quantum Leap?“

POSTED ON 13. Juli 2018 BY RALF HESSE

The new generation of cardholder authentication “3D Secure 2.0”
3D Secure has often been (and still is being) promoted as the magic miracle cure, which should cure the misery of default on the merchant side. Initiated by VISA in the early years of this millennium and prominently placed as said miracle cure, however, the teething troubles soon showed up – first and foremost the problems with the “conversion rate” among 3D-using traders. The use of 3D Secure caused unintentional payment cancellations by the cardholders and thus reduced the sales of the affected merchants. The conversion rate describes the ratio of the visitors of an online shop based on clicks to the conversions, i.e. the conversion of prospective or interested buyers into buyers.

 

The problem, on the one hand to minimise the risk of payment default by chargebacks, but at the same time to permit maximum potential sales at the participating merchants, could not be solved in the used variant of the 3D method (version 1.0). When PSD2’s European payment supervisors then demanded strong customer authentication for much of Europe’s well-known card payment traffic, they took pity on the merchants. The major credit card organisations (Visa, MasterCard, AmericanExpress and JCB) formed and defined a new authentication standard, “3D Secure 2.0”, within the joint venture “EMVCo”, which today is largely responsible for the EMV standards. This was to turn the former miracle cure into a remedy that would have to completely eliminate the suffering of the merchants and at the same time meet regulatory requirements.

 

3D Secure 2.0 is also the answer by card organisations to the requirements of strong customer authentication (the PSD2), which is already to be implemented by September 2019. The new specification also ensures that the international schemes offer a consistent standard for consumers, merchants, issuers and acquirers.

 

In October 2016 the time had come and the specification of the new standard was published by EMVCo. Looking at the operational steps of the new method from the helicopter perspective, serious changes can not be easily recognised in comparison to the old method. The devil is as always in the detail, and it is precisely these details that give hope that with the 2.0 version one has found a cure. The new procedure has defined different process steps for new (or at least modified) roles. The classic, well-known role from the point of view of the traders in the old procedure, was the role of the Merchant Plug-In Operator (MPI). This is explicitly no longer used in the new specification. It therefore remains to be seen how today’s MPI operators will operate with a technical solution in the 3D Secure 2.0 process (for example as a technical service provider of a “3DS server”).

 

In addition, the product managers at EMVCo have integrated a new ingredient that reduces payment cancellations in the old 3D process – and even stops them altogether. The so-called “Frictionless Flow”, namely, allows within the new standard an authentication without additional interaction with the person to be authenticated.

 

Now that the regulations of the two largest credit card organisations (VISA and MasterCard) regarding the new 3D Secure 2.0 procedure have been adapted with the Autumn 2017 release, it is now time to advance the implementation of 3D Secure 2.0 in the (partly new) operational instances.

 

However, to be able to use the new procedure, each participating entity must implement technical changes in their systems, since the procedure involves some changes compared to the old authentication.

 

By 01/01/2020 at the latest, however, according to the current plan of the MasterCard, all authentications should be carried out only according to the 3D Secure 2.0 standard. However, Visa has already postponed its April 2018 rollout (dealer-initiated authentications only) to April 2019. The timetable seems very ambitious planned and will then have to be confirmed by reality.

 

Crucial to the success, however, is the future use of the process by the e-commerce community – that is, the transaction volume using 3D Secure 2.0 authenticated payment transactions. Therefore, assuming that the “3D Secure Weaving Machine” (consisting of Access Control Server and Directory Server) is (or has to be) implemented by the operational specifications and deadlines of the credit card organisations, the merchant remains the same as before – and as in the old procedure – can make or break the success of this innovation. And this is precisely what the teething troubles of the old “miracle cure” know from their own, painful experience, and should therefore show a rather moderate interest in a (from their point of view) imposed renovation.

 

The acquirer as a liable entity in the 4-party model must inevitably have an immense interest in the use of the new procedure, because only in this way can he comprehensively get rid of the liability in the case of a chargeback case back to the issurer by means of a liability-shift. So that the acquirer can use the new procedure effectively at the merchants connected to him, the problem of the conversion rate must be solved. This in turn can be eliminated by definition within the new standard only if the majority of the authenticated transactions are processed via the newly defined “Frictionless Flow”, in which an additional security query in the authentication process with the cardholder becomes superfluous. However, this “Frictionless Flow” implies that the merchant directs enough information about the cardholder and the transaction to be authorised in the authentication process to the issuer, who then “favourably” agrees to this authentication without further request from the cardholder, based on their own risk assessments.

 

It is therefore quite unclear as to what percentage, at the end of the day, authentication in “Frictionless Flow” is processed. And this is precisely where the credit card organisations have left their acquirers in the cold, since on the one hand they do not make binding stipulations to the issuer regarding the risk assessment in-house, but on the other hand they do not provide the acquirers with any support for using the new standard.

 

Operationally, 3D Secure 2.0 brings many new features with it and is also well-equipped for regulatory purposes. The status of a “facelift” of this tool can therefore be safely attested. However, if 3D Secure 2.0 is to trigger a “quantum leap in authentication” – and the potential for doing so is given by the new specification – further definitions or restrictions are needed to get rid of forever the old teetthing problems of the “Conversion Rate”.

„Banking is necessary, Banks are not“

„Banking is necessary, Banks are not“

POSTED ON 02. May 2018 BY DENNIS JÄGER

 

Das Zitat „Banking is necessary, Banks are not“ bietet ein gutes Entre, wenn es um die Zukunftsgestaltung von Banken geht und ist daher fester Bestandteil von PowerPoint-Slides, die vor der Führungsebene in Banken und Sparkassen gehalten werden. Es lässt sich in diversen Artikeln und Magazinen wiederfinden und wird häufig im Zusammenhang mit der Disruption im Finanzsektor genannt. Die Worte stammen von Bill Gates und wurden vom selbigen bereits 1994 kundgetan. Zu der Zeit befand ich mich in der vierten Klasse und war schlicht über die Einfachheit des Bankensystems verblüfft. Wenn man Geld brauchte, ging …

Download (only available in German) >

„Options for PSD2 implementation“

„Options for PSD2 implementation“

POSTED ON 09. May 2018 BY JAN CLAAS BRINGEZU

Although in force since January of this year, in the eyes of many PSD2 will only become really relevant and complex with the final entry into force of the RTS (Regulatory Technical Standards for PSD2) on 14th September 2019.

In addition to Strong Customer Authentication (this is worth a separate contribution…), the RTS will above all, but not only, lay the regulatory basis for the much, and in part hotly, debated services „Payment Initiation Services“ (PIS) and „Account Information Services“ (AIS) newly created by PSD2. PIS stands for a payment initiation service such as Klarna already offers with SOFORT. AIS means an account information service such as is already available, for example, as part of Deutsche Bank‘s multibanking service. Examples already show that PSD2 does not enable new, revolutionary services, but rather regulates existing activities (with the consequence that companies operating in this area now require a regulatory license) and obliges banks to provide access to their customers‘ accounts according to defined rules.

Now it is correct that due to PSD2 the competition for a customer burns more strongly than before; besides the established players, the banks and savings banks, other enterprises are competing more and more frequently – in the PSD2 context these are the so-called Third Party Provider (TPP) – to gain the favour of the customers. However, unlike the usual one, this distribution battle is not about better conditions for individual products, but about the big picture – the customer himself. Whoever succeeds in making a convincing offer in the sense of user experience will represent the front end for the customer and thus become the access for this customer to the banking offers (regardless of which bank). And those who occupy the front end will ultimately also be able to influence the services and products offered and thus have a correspondingly larger share of the added value.

So at least the general theory…

As a result, it is insufficient for banks and savings banks to implement the requirements of the PSD2 RTS in order to be „compliant“. Rather, either defence mechanisms must be developed from these in order to be affected as little as possible by the TPP, or strategies must be devised as to when an institute can benefit from the regulations of PSD2. Defensive mechanisms will not work, since customers of a bank or savings bank cannot now be persuaded that SOFORT or PayPal are „evil“. On the contrary, customers use these services unremitingly because they have advantages over their own bank‘s services. As a sensible answer that remains to PSD2, is therefore, a progressive handling of this and, for example, a positioning of the institution as a central interface to the customer‘s banking and thus also to the customer‘s accounts with other banks. In fact, this does not require a TPP; a bank or savings bank can also offer this directly to its customers. Deutsche Bank, for example, will certainly and consistently expand its multibanking offer, which is currently only an account information service, to include the possibility of triggering payments at other institutions. Deutsche Bank customers would be able to manage all their payment transaction accounts without having to log into online banking at other institutions.

Consequently, not only in Germany but all over Europe the consulting companies are chasing after their (target) clients, by the way we, too, from OSTHAVEN, and spreading the message that the houses have to position themselves according to PSD2 and design offers in order to represent the central front end of the client for banking even after 14/09/2019 and not lose this to a TPP or another bank. PSD2 represents the end game around the clients for all banks and savings banks, if necessary.

For everyone? No, at this point we expressly disagree! Not with regard to the requirement that all banks that maintain „payment transaction accounts“ (here the market still lacks a clear definition) must have implemented the requirements of the RTS by 14th September 2019. But we are of the opinion that the PSD2 is not strategically relevant for all banks beyond compliance. It is undisputed that retail banks and banks with a high proportion of retail customers and a focus on checking transactions will be massively affected by the PSD2, but in return strategic advantages can also be drawn from the rules and regulations. In addition to retail banks, there are also many institutions that will not be able to benefit spontaneously from the implementation of PSD2 or will not experience any direct competitive disadvantages. We include banks here that are active exclusively in corporate banking. Triggering payments plays hardly any role for these customers and multibanking is already a reality thanks to the use of software. Even banks that focus on financing and deposit products can only benefit from the PSD2 with a lot of imagination. We could go on… It should become clear that the establishment of ecosystems or the convergence of banking and non-banking based on PSD2 rules is not meaningful or necessary for all banks. We consultants also have to operate with a sense of proportion here.

„The Future in Banking & Payment“

„The Future in Banking & Payment“

POSTED ON 07. May 2018 BY HENRIK BÜTTGEN, DENNIS JÄGER, JANA SCHNEIDER

Trends come and go – this also applies to payment transactions. The drivers of innovation are often technological progress, regulations, costs and the customer. But what are the latest developments and research in this area? An OSTHAVEN perspective on the future in banking and payment.

Now, be honest, how many different passwords do you actually use for your everyday business? Studies have shown that a typical behaviour for users, on many devices, Internet portals or even online banking, is to use the same password. The human brain likes it easy and is lazy. So, the name of grandmother’s dog in connection with the own landline phone number as a password is very tempting. The risk of misuse of this password, however, is very high. A big trend is starting right here, and using new technologies, it is looking for ways to measure or identify the biological uniqueness of people and thereby enable a secure recognition. The science behind it is biometrics. First solutions have long since spread into everyday life. Unlocking a smartphone via a fingerprint has made it unnecessary for years to enter a code or password. In the meantime, entire payment transactions are triggered by means of a fingerprint. Apple has determined an error rate of 1:50,000 in the process of the Touch ID (apple.de). With the birth of the new generation of smartphones, face recognition has become socially acceptable and works very well. With the Face ID the error rate of 1:1,000,000 on devices with an apple in the logo is still clearly below the rate of Touch ID. The appearance of the mouth, nose, eyes and ears as well as the individual head shape and other features are unmistakable in combination and are ideal for authenticating. In addition to the techniques and procedures that have already appeared in everyday life, there are other possibilities that once sounded like science fiction but have now arrived in the midst of reality. In the search for distinctive human biometric features, a person‘s voice is as unique as its appearance. Barclays Bank has recognised this fact for itself. Customers can register via a voice scan. As soon as a customer‘s voice can be heard in the call centre, it is automatically identified based on numerous voice characteristics. The method of voice identification pays attention to another trend in the field of payment and banking. We are talking about „Voice Banking“. Since Amazon’s Alexa, Apple‘s Siri and other digital assistance systems have spread out in the living room and have simplified many things of everyday life, the desire of customers is to manage their bank account by voice and make payments almost by tongue.

Payment by „laying on of hands“ is also no longer a utopia. Another method that can be used for payment procedures is the so-called vein scan. Customers of the British supermarket chain, Costcutter, can pay for their purchases with this new biometric procedure. The vein pattern of their fingers is scanned and connected to the bank data. At the supermarket checkout, the stored data is then compared with the scan data. The customer actually pays by a „laying on of hands“.

OSTHAVEN is convinced that biometrics will become an increasingly important topic in banking and payment transactions. The new authentication methods especially impress with their high security factor and convincing practicability in everyday life. Another trend in payment and banking is Artificial Intelligence (AI). This is known by many as the „new industrial revolution“. AI does not stop at the financial sector. Since banking is more about services than about a physical product, and personnel is a significant cost factor, it makes sense to use artificial intelligence to automate processes more. Thus, in the past few years the Chatbot service has been introduced in direct customer contact in many houses. With the help of a good AI solution, the majority of customer inquiries can be answered directly around the clock, without human interaction. For banks there is a huge savings potential and more opportunities to increase customer satisfaction. However, AI is not only used in customer interfaces, but also in sales analysis. AI in combination with big data enables a customer to analyse and evaluate his data in a matter of seconds. In addition, we see possible applications of AI in fraud prevention or individual product recommendation based on the comprehensive analysis of customers‘ financial position. Especially in the financial industry there is a wide range of applications.

It is obvious that there are many parallel technical developments in all areas of human life. The potential benefits and theoretical applications seem to be unlimited. In addition to individual innovations and the use of different devices in the daily lives of users, the networking of these different technologies will become increasingly important in the future. The Internet of Things describes the rapid growth of Internet-connected, intelligent devices. The networking of physical and virtual objects is in the foreground. In the target vision, these objects should work seamlessly together through information and communication

technologies. There will be completely new application scenarios for payment transactions in the future. Imagine that every networked device can be used for cash transactions and thus become its own, individual Point of Sale. It is conceivable that garage parking and toll fees and petrol station tab could be paid contactless by means of „Connected Car“. The driver can stay comfortably in the car and save himself the trip to the cash register or to the ticket machine. What happens in this case with the petrol station shop sales? Car manufacturers, however, go one step further and change their business model by offering custom features, accessories and digital services in the connected car as „pay-as-you-go“ services. The resulting opportunities for car manufacturers are enormous and also the benefits of cost reductions and efficiency gains in production.

OSTHAVEN sees the increased customer requirements for the most secure but noiseless authentication as an opportunity to drive forward the bank‘s own digital payment solutions. In the context of new technical developments such as AI and regulatory framework conditions such as the PSD II, which encourage the design of new products, innovative forces can be released from traditional players on the market. What all approaches have in common, however, is the fact that the „customer“ and his needs for simplicity remain as the foci of interest and are drivers or obstacles to possible developments.