The implementation of the Payment Service Directive 2 (PSD2) is perhaps the most disruptive and exciting development in the banking sector in years. The data of the bank customer will now be shared with third-party providers, paving the way to new innovations and digital business models such as payment through social media. This banking technology trend will build the foundations for a virtual open banking ecosystem.
Business models based on community, data, and technology, have seen success in the open platform economy by allowing third-parties access to their platforms. Usually, in such environments, the increase in the number of users will result in the increase in the value of the platform. Some of these platforms exchange information with each other, increasing their data and making them more powerful. Now, banks have to shed their shell and become one of these open ecosystems.
The inclusion of third parties, such asfintechs, into the banking ecosystem will provide banks with innovative financial solutions and help deliver a better user experience. This model will only work if banks and fintechs co-create rather than compete with each other. Fin techs can help banks enter the digital payments market and banks can provide additional security to fintechs through their key infrastructure and regulations. It is a win-win situation.
The risks persist. The easiest and safest way for banks to open up their data and services is through APIs (Application program Interface). This way, developers can build apps that fit their specific need on top of the APIs instead of starting from scratch.
Evidently, this evolution of technology in banking is aimed at benefitting the stakeholders. Banks and fintechs will now jointly contribute to creating a new revenue stream making modern payment easier..