Open Banking and the digital transformation of banks
The spread of new payment instruments, the unstoppable technological evolution and the new European directives, including PSD2 (Payment Services Directive 2), have opened up new scenarios for banks.
New digital competitors are threatening to erode their traditional value chain.
PSD2 and Open Banking
PSD2 is the European Payment Services Directive that entered into force on 13 January 2018 and was issued after two years of planning.
However, it had to wait until 2019 to see its consequences. During this year, in fact, Open Banking officially entered the lives of banks: the sharing of data between the different players in the banking ecosystem, which is approved by the banks’ customers themselves.
The directive obliges European banks, for the first time ever, to open up their APIs (Application Program Interfaces) to third-party companies dealing with financial products and services and to fintech (technology applied to finance) companies. This is a real revolution, as it allows external companies (the third parties) access to payment data.
What does it mean? It means that there will be increasing competition in areas of traditional bank dominance. APIs can provide third-party developers with the right channels to get at the bank’s customer data, thus enabling TPPs (Third Party Providers) to use that data to build their own products and services.
Open Banking in Italy and Europe
Let’s try now to focus on Europe and then on Italy to understand at what point we are with Open Banking, compared also to other countries.
In 2020 in Europe almost a quarter of banking institutions activated at least one fintech partnership to access Open Banking technologies. The most forward-looking institutions have up to five different partnerships in place. The 69% of the sample surveyed have increased the number of fintech partnerships in 2019 and the same percentage is planning to establish a partnership by 2021.
In Italy, however, the data is below the EU average. On 14 September 2019, the day when all banks should have made APIs available to third-party developers, there was a request for an 18-month extension. Why? The industry was not yet ready to implement PSD2. As for fintech partnerships, only 17% of financial institutions currently have any in place with the aim of increasing their Open Banking strategy.
Omnia with banks
As a result of these changes there will be increasing competition in those areas that are traditionally the domain of banks and PSD2 will help change the relationship between consumers and financial institutions.
Digital transformation shifts the focus from a process-driven to a data-driven world. Omnia combines the best of both worlds, data and processes, in a single platform. In this way it accelerates and simplifies the transformation of banks by supporting them in implementing an Open Banking model.
Erika Trotto
