How New EU Regulations Will Transform the Customer Experience for Financial Services

Customer Experience

The Revised Pay­ment Ser­vices Direc­tive and What It Means for Your Cus­tomer Expe­ri­ence, Part 1: Two Types of Ser­vice Providers

The last few years, the finan­cial ser­vices indus­try has been defined by ever-accel­er­at­ing change. Changes in cus­tomer behav­iour and advances in tech­nol­o­gy, such as mobile wal­lets, bio­met­ric authen­ti­ca­tion, and Big Data, have trans­formed the way con­sumers inter­act and engage with banks—while dis­rup­tive new com­peti­tors like Atom Bank and Mon­do have chal­lenged tra­di­tion­al play­ers by pro­vid­ing more agile dig­i­tal-first bank­ing expe­ri­ences.

Now, a new set of EU reg­u­la­tions is set to dis­rupt the indus­try like nev­er before. The revised Pay­ment Ser­vices Direc­tive (PSD2) man­dates that all banks must open up their core bank­ing sys­tems and share cer­tain types of cus­tomer data with third parties—including poten­tial com­peti­tors.

Fran­tic dis­cus­sion has erupt­ed over the IT and tech­ni­cal hur­dles involved in these changes, along with PSD2’s impli­ca­tions in terms of secu­ri­ty, oper­at­ing mod­el, and organ­i­sa­tion­al change. These are all of fun­da­men­tal impor­tance, but at Adobe, we believe there is one more crit­i­cal hur­dle to over­come: these new reg­u­la­tions will force every bank to dif­fer­en­ti­ate through their cus­tomer expe­ri­ence, and it will make that expe­ri­ence more impor­tant than ever before.

Over the next few months, banks will begin to face cus­tomer expe­ri­ence chal­lenges from new­ly empow­ered ser­vice providers—especially those known as PISPs and ADASPs. To com­pete and to suc­ceed, they will need to start address­ing these cus­tomer expe­ri­ence chal­lenges now.

Pay­ment providers

The first type of chal­lenger to emerge in the PSD2 world will be the third-par­ty pay­ment ini­ti­a­tion provider (PISP). These com­pa­nies will empow­er new pay­ment solu­tions for cus­tomers by link­ing bank accounts with their own user-friend­ly tech­nol­o­gy. They’ll achieve this by access­ing each bank’s appli­ca­tion pro­gram­ming inter­face (API)—which will be required to be open access under PSD2—authenticating the user, and enabling that user to make a pay­ment online or from a phone or oth­er con­nect­ed devices.

This API approach pos­es a sig­nif­i­cant and real threat to the rev­enue dri­ven from card-based trans­ac­tions, as, in the­o­ry, all fees cur­rent­ly received by the issu­ing and acquir­ing bank could be sup­plant­ed, as could the fees for the proces­sor and card net­work.

Aggre­ga­tors and rec­om­men­da­tions

The sec­ond major chal­lengers to emerge under PSD2 will be account data aggre­ga­tion ser­vice providers (ADASPs). These com­pa­nies will access data from cus­tomers’ bank accounts to pro­vide spend­ing break­downs, sav­ings rec­om­men­da­tions, and oth­er per­son­alised ser­vices. And the com­pe­ti­tion is not nec­es­sar­i­ly going to be who you think.

It is high­ly con­ceiv­able that Apple will devel­op a finance frame­work (sim­i­lar to its HealthK­it frame­work) that will allow easy and secure data con­nec­tion and stor­age through Account Infor­ma­tion Ser­vices (AIS). This would allow any devel­op­er to build high­ly engag­ing, pro­fes­sion­al user inter­faces for per­son­al finan­cial appli­ca­tions, whose aggre­gat­ed data could present cus­tomers with one sim­ple view of all their cur­rent sav­ings and cred­it accounts from mul­ti­ple retail banks. This would there­fore bypass the need for cus­tomers to access their own banks online and mobile bank­ing tools, reduc­ing the oppor­tu­ni­ty for them to cross-sell and up-sell oth­er prod­ucts.

Anoth­er ser­vice we envis­age com­ing from these ADASPs is rec­om­men­da­tions. By being grant­ed access to a customer’s per­son­al trans­ac­tion data, and devel­op­ing their own algo­rithms, these new com­peti­tors can rec­om­mend bet­ter finan­cial ser­vices and prod­ucts. That said, there is noth­ing stop­ping you from build­ing great expe­ri­ences and rec­om­men­da­tions for your cus­tomers.

These new star­tups won’t need to cre­ate any core bank­ing infra­struc­ture to pro­vide these ser­vices. All aggre­ga­tion ser­vice providers will have to do is deliv­er a great cus­tomer expe­ri­ence to cus­tomers using their app or website—while gath­er­ing their own first-par­ty cus­tomer data, which they can then lever­age to pro­duce even more rev­enue streams.

For both types of disruptors—PISPs and ADASPs—customer expe­ri­ence will sit at the core of their mis­sion and func­tion­al­i­ty. This aligns pre­cise­ly with the mes­sage we empha­sise at Adobe: the cus­tomer expe­ri­ence must be absolute­ly cen­tral for any finan­cial com­pa­ny that aims to suc­ceed in the com­ing year.

In the sec­ond blog of this series, we’ll explore what PSD2 actu­al­ly means for your organisation’s cus­tomer experience—and we’ll exam­ine one cru­cial choice you’re going to have to make in order to get ahead of your com­pe­ti­tion. See you there!

Customer Experience
Michael Plimsoll

Posted on 02-06-2017

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