By the September deadline, Europe’s banks and fintech companies should be compliant with the Second Payment Services Directive (PSD2).
Rather than focusing inwards on business operations, PSD2 is an outward-looking directive. It encourages open access and competition in the banking industry. Organisations across the breadth of the industry are required to open their payments infrastructures and customer data to third parties. This trend will create unprecedented opportunities for new and innovative fintech services across a much wider and more dynamic banking landscape.
At the same time, this shift heralds a new era for innovation in fintech software and solutions.
The changing face of competition
The trend towards open banking redesigns the competitive landscape of the fintech industry across Europe. As a result, existing service providers will see increased competition within their own market as well as new competition from entrants such as technology companies, retailers, telecommunications providers, and even crowdsourcing platforms.
Banks and fintech organisations know that this demands an agility beyond the reach of their legacy silo-based systems. Moreover, it requires innovation in the form of new services, cross selling and upselling to secure customer loyalty and reduce churn. The spotlight will shine on ISVs to deliver new solutions for the market that take advantage of the open environment.
Interoperability underpinning innovation in fintech
Customers are increasingly expecting real-time, personalised and seamless service offerings from their banking service providers. On the business side, this heavily relies on fintech companies deploying a more scalable and flexible SaaS-based infrastructure. Consequently, in a bid to increase operational agility and scalability, they must move away from wholly-owned legacy systems.
All this disruption creates an unmissable opportunity for software developers to create and market new products for the industry. Here, interoperability is key.
Forward-thinking ISVs can offer new opportunities to fintech companies that are considering how their legacy operation can integrate with new software services as well as for collaborations and new competitors aiming to create impact and secure customers.
Focus on time and cost to market
Time and cost to market for new consumer products and services will become even more important in the post-PSD2 marketplace. Reducing the burden of integration is a key component.
Building a white-labelled integration platform as a service (iPaaS) solution into the foundation of own software products enables ISVs to offer complete interoperability with any existing architecture, as well as any applications or collaborations that may be added in the future. And with this integration capability at the heart of the product, the ISV can guarantee reduced integration costs, increased connectivity and agility across systems to provide a strong business case to attract – and retain – banking sector organisations. Ultimately, such capability is one of the key steps on the path to innovation in fintech software and industry.