Moderator: Glen Ward - Nationwide
Expert: Michael Davidson – Freedom Finance
PSD2 represents a change to the industry that effectively removes many of the barriers that previously advantaged the current incumbents. The key question in the room was – Is PSD2 a threat or opportunity? In summary, it is both depending on the firm’s perspective and response. The difficulty being what is the appropriate response.
Many of the existing financial firms will continue to focus on developing their existing client propositions which for some of the smaller specialist or locally based providers has led to a resilient and loyal customer base. This was followed by a discussion on the importance of understanding the customer base and segmentation strategies to better respond to the opportunity or manage the risks presented by the change. It was also recognised that whilst this change has the potential to be highly disruptive, the pace of adoption was uncertain and therefore there was time for many to assess developments before responding with new strategies and propositions.
Of concern for some was the potential volatility and management of the balance sheet due to the potential ease that liabilities may move to optimise returns. One consideration was that open banking enhanced the ability to support a wider set of customers by partnering or co-operating with other third parties. In this regard, many incumbents currently use intermediaries for mortgage distribution which in its current form exists as an open market that is very competitive. This led to the conversation that whilst we may make the mortgage approval process quicker and easier, until the end to end process is transformed such as conveyancing, the process will remain challenging to complete in materially shorter timeframes. It was also highlighted that we should not be comforted by the assumption that open banking is only attractive to younger generations, where some highlighted the age range of digital users went from teens to the nineties.
PSD2, whilst not the drama of Brexit, has certainly got the interest of the financial services sector and although the implications are uncertain most agree that over time it has the potential to disrupt the industry. In turn, the ability to respond quickly may represent the difference between success and failure.