The environment in which banks operate is no longer predictable. Banks face significant challenges stemming from incessant and complex regulation, business difficulties in a scenario of zero or negative interest rates, and rapid digital transformation. Banks must develop their strategy by accounting for the first two factors, while placing the customer at the center of their digital strategy. They are accustomed to making the most of every scenario, finding opportunities where others see risks. And when a bank finds opportunities, it turns them into benefits for the customer and society.
Digitalization facilitates competition in the provision of financial services. Regulatory changes have opened the door for this new competition in the digital environment to come from operators that provide financial services without being banks: financial startups and big tech. The former, known as fintechs for applying technology to financial services—just as banks themselves do—are sources of innovation for financial institutions to collaborate with or assist in their creation. The latter are large technology companies, leaders in other sectors, that see opportunities in certain segments of the banking business, such as the payments area.
The new European payment directive will contribute to increasing transparency and competition in payment activities, which will favor digital and mobile payments in the future over cash. It will also result in a new range of services and, consequently, a richer payment ecosystem. Following PSD2, two new payment services are created: payment initiation and account aggregators. The actors performing these two new services will be registered and under the supervision of the corresponding national authority. The creation of APIs by banks allows for the best possible management of data access, always with the customer’s consent and for specific data. All of this takes place within an environment where already high security is further reinforced. It is essential that the rules for third-party access, as well as those for registration and supervision, are consistent across all European union countries, as the ultimate goal of the regulation is to have an efficient and fast payment system in a secure environment.
However, the Second Payment Services Directive also brings new challenges for banks and potential risks for customers by allowing third parties to enter the market using part of the institutions’ infrastructure. These new payment operators must comply with the same requirements and obligations as banks. It is also fair that, provided the customer permits it, there can be an exchange of information between banks and these new operators. Nevertheless, the regulation allows tech companies to access bank data, but not vice versa.
Regarding risks to the customer, consumer protection regulation should focus on the activity and the potential risk assumed, rather than on who performs it. The provision of payment services, like all other services provided by banks, is an activity regulated for reasons of financial stability and consumer protection. Therefore, it is essential that new operators offer consumers the same security guarantees as banks.
Innovation should not be the differentiator between banks and the rest of their competitors. Banks have been and continue to be the main driver of technological advancement applied to the financial world. They are the traditional fintechs. As such, they work side-by-side with new operators to bring modernity and efficiency to financial operations, with the ultimate goal of providing the best response to customer needs.
