PSD2 has been one of the most fiercely debated payments topics of recent times. Will this be the death of traditional banks? Will consumers get a better deal when it comes to financial products? Are FinTech's going to take over?
To spend our time focusing on which FinTech companies might survive or how many customers the banks could lose, would be a fruitless task. Instead, we should be looking at how the landscape will evolve beyond this honeymoon period of hope and anticipation – how will all participants need to adapt to operate in this new environment, and how will they get there?
Learnings from the dot-com era
The buzz around PSD2 reminds me a lot of the dot-com boom. We were at an exciting milestone for the internet, and investment was flooding in to all different types of web-based companies, and there are strong parallels with today. Although, I'm sure we won't see the bubble burst quite so greatly as we did with the dot-com era.
Banks being obliged to open their APIs, allowing FinTech's and other tech companies to create their own solutions is certainly an exciting prospect. There's a certain dissatisfaction with traditional financial service providers, from getting a mortgage right through to customer service. As a result, there is an inevitable attraction to investing into challengers that seek to right these wrongdoings and effect real change.
But we're certainly in 'bubble territory' right now. There will be FinTechs and tech companies that will create innovative solutions that will appeal to consumers and will manage to capture them whilst delivering convenience, and inevitably there will be those that fail. After all, there's only so many solutions that you can present to a customer but, how many will they actually end up adopting?
It all comes down to considering PSD2 as part of the bigger picture. It's a multi-dimensional framework that moves towards greater transparency, competition and a richer customer experience, not as a means to an end in itself.
Aside from the cost aspect, what consumers really want from their financial service providers is a great customer experience, and trust in their providers, being able to access the services they want and need when required through a frictionless process. According to Accenture's 2017 banking report, nearly half of consumers want relevant tailored advice and product information at their fingertips and high quality customer service is key to keeping them loyal for as many as half of the respondents questioned.
Categories aside, whether a FinTech or a bank, financial service providers need to be striving to meet customer needs, with PSD2 serving as an enabler to do so. No matter how established your business is, if your customer cannot contact you when they need you, there's a high chance that the customer will consider going elsewhere. This is where the banks should be worried – PSD2 will inevitably provide other options, such as enhanced digital banking apps, which will become more attractive. However, on the flip side, some of the challenger banks are far less experienced in delivering responsive, high-quality customer service, meaning that automatic loyalty isn't a given for them either.
Financial services providers therefore must take an agile approach in this PSD2 world. They need to be able to test products and solutions quickly to learn whether they fit a customer's needs and will prove complimentary in maintaining and growing their customer base. For example, data might show that customers contact their banks most frequently between the hours of 6pm and 7pm – it would then make sense to experiment with some form of Chabot solution to manage increased communication. However, if customer complaints subsequently rise at this time, it's clear that the solution didn't quite work.
It's all about innovating fast and failing fast in this new financial landscape, with PSD2 serving as an accelerator amongst banks and an enabler across the FinTech and banking ecosystem as whole.
Customer service has to be at the forefront of every decision that a financial service provider makes – we'll likely see more partnerships and collaborations whereby banks work with tech companies to add value, for example.
PSD2 is the regulatory catalyst designed to accelerate change in the financial services sector in Europe. Some might say that it is long overdue. Rather than thinking of it as a stand-alone directive, we need to think of it as the prompt to think more deeply about how we can improve service delivery, the customer's experience and become more relevant and valuable to them. Whatever the outcome of PSD2, firms that provide feature-rich products that their customers need, combined with responsive high-touch customer service are more likely to succeed in the battle for hearts and minds under the new regulations.
Nick England is CEO of EasyFX