„Options for PSD2 implementation“

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.