This article was published in collaboration with Deutsche Bank.
Market disruption, client evolution and regulatory change mean that the banking and corporate world is preparing for an API and Open Banking revolution. Making a success of it will require both collaboration and standardisation.
We can now say that we live in an “API economy” and, yet, we are only just getting started. While API technology itself is not new, market disruption, client evolution and regulatory change mean that the banking and corporate world is preparing for an API and Open Banking revolution.
In Europe, in addition to the general drivers prompting API development among businesses – extending business reach, improving time to market, developing new partnerships, nurturing new business models and fostering agility and innovation – APIs have become particularly relevant by reason of Europe’s second payment services directive, PSD2.
While it came into force on 13 January 2018, PSD2’s most transformational provisions have yet to come into full effect. From September 2019, they will oblige banks to give third-party payment providers access to their customer accounts through a new interface. There seems to be industry consensus that APIs will provide the most secure and effective means of providing this.
In a new white paper, entitled “Unlocking opportunities in the API economy”, Deutsche Bank joins forces with Innopay to outline how corporates, financial institutions and fintechs may prosper in this new payments environment.
“Many corporates are only just beginning to wake up to the opportunities that PSD2 will open up to them in terms of streamlining and reducing the cost of their payments, gaining access to exciting new services, and improving risk controls,” says Shahrokh Moinian, Global Head of Cash Products at Deutsche Bank. “Of course, there are also significant rewards on offer for the banks and fintechs that best provide this enhanced customer payments service, using compliance with PSD2 as a stepping stone towards Open Banking.”
First things first: making PSD2 work
There are, however, challenges ahead. If the “access to accounts” element of PSD2 is not implemented properly and rolled out at scale, there is a serious risk of market fragmentation for innovative payment and account information services. This would not only endanger meeting PSD2’s objectives, but also provide a significant barrier on the journey towards an Open Banking ecosystem in which customers are in control of sharing their financial assets and personal data with their providers of choice.
This has therefore created a need for industry collaboration, with some standardisation initiatives emerging in Europe in response. If all, or at least most, banks do not have standardised API connectivity in place in time for September 2019, corporates, their customers, as well as banks, other payment service providers and fintechs all stand to lose out. This paper addresses a dynamic and evolving landscape and aims to helpmarket players understand the emerging opportunities for different market actors, the current state of play in PSD2 standardisation initiatives, and API standardisation in particular.
Click here to download the white paper, and learn more about how you can unlock the opportunities afforded by the API economy.