Open Banking Revolution Under PSD2
Key Points
- The EU’s Employment Services Directive mandates that banks expose their account‑service interfaces to trusted third parties, forcing a major technology overhaul over the next two to five years.
- PSD2 expands payment‑service eligibility beyond banks, allowing telecoms, media firms, and other non‑financial entities to initiate transactions while imposing safeguards on money handling.
- This regulatory shift fuels a new open‑banking ecosystem where fintechs and incumbents can combine account data, balances, and transaction history into innovative, integrated services.
- Parallel UK “Access to Account” standards echo PSD2’s goals, promoting competition by granting authorized providers secure, standardized access to customers’ bank accounts.
Full Transcript
# Open Banking Revolution Under PSD2 **Source:** [https://www.youtube.com/watch?v=actiLf_DNtg](https://www.youtube.com/watch?v=actiLf_DNtg) **Duration:** 00:11:52 ## Summary - The EU’s Employment Services Directive mandates that banks expose their account‑service interfaces to trusted third parties, forcing a major technology overhaul over the next two to five years. - PSD2 expands payment‑service eligibility beyond banks, allowing telecoms, media firms, and other non‑financial entities to initiate transactions while imposing safeguards on money handling. - This regulatory shift fuels a new open‑banking ecosystem where fintechs and incumbents can combine account data, balances, and transaction history into innovative, integrated services. - Parallel UK “Access to Account” standards echo PSD2’s goals, promoting competition by granting authorized providers secure, standardized access to customers’ bank accounts. ## Sections - [00:00:00](https://www.youtube.com/watch?v=actiLf_DNtg&t=0s) **PSD2 Unlocks Open Banking** - The EU’s Payment Services Directive (PSD2) requires banks to share account data with trusted third‑party providers, enabling non‑bank firms to offer payment and financial services and prompting a significant technological transformation in the industry over the next few years. ## Full Transcript
there's a regulation called the
Employment Services directive - which is
kind of dull sounding like all
regulation but it does in fact force all
of the banks to open up their account
services to third parties or trusted
third parties very importantly so that
they other people other than the banks
can provide services to their customers
both commercial customers and consumers
so that's going to change everything and
that means they have to provide that
information they can they could be some
of those trusted third parties
themselves and enhance the services
they're already providing but it's a
very very intense piece of technology
change it's going to happen over the
next two five years PSD to that the
second payment services directive from
the European Union looks at the modern
world and they've said you don't have to
be a bank you don't have to be a
financial institution you could be a
telecoms company you could be a firm of
analyst you could be a newspaper you
could be anything that involves that
transaction there's no reason we have to
give you special status and call your
bank or a fine institution there are
going to be safeguards if you're taking
people's money obviously because that
could be yeah the Wizards robbery it
invented what the future of banking and
financial services might look like and
then it's the job of the industry and
newcomers and entrepreneurs and guys
with ideas to come along and populate
that that future which is a one issue
for the incumbent banks is another issue
for the FinTech startups they've got
lots of new ideas and somehow that will
all come together and a new ecosystem
will emerge it won't just be here's your
account this is the amount of money you
have or don't have and here's a list of
transactions all of that could be
integrated in clever aways pac-2 doesn't
specifically a couple of things and the
one that is good cause most confusion to
create everybody is going to have access
to everyone else's bank account and this
is not just happening in Europe in the
UK in a post European UK there is the
thing called the UK open banking
standards which kind of fits in with the
PSB idea
it's called access to accounts xxs to a
these have people who breathe you a live
Alice this is horrible and clumsy
abbreviation so access to accounts means
that payment service in initiators or
payment service providers can be payment
initiating service providers or one of
the key things about the PSD to
phraseology and legal terms is trusted
third party I certainly would trust my
bank for instance because I trust them
with my money and they look and it could
be anybody this huge competition so
suddenly the competition which is the
point of PSD to because that's the point
of the European Union you see where that
suddenly comes together never got a
proper fair fight between everybody
you
we're standing right in the middle of
the the main financial district in
numbers or weather all very close
together they're already told to each
other very much and they don't really
communicate except through
intermediaries like exchanges and
clearinghouses and that's what's really
about to change
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it's all about everybody playing in the
same ecosystem so nobody's our
specialists anymore which is kind of
good but it means you have to go and
find the specialist in that particular
bit so there's lots of gaps in
everybody's knowledge and and that you
know play nicely together my idea is
going to be very difficult for some
people to do but it's going to be
essential for them to work with others
to recognize the skills of others we
know what you're good at know what other
people are good at and find the skills
you need to get to where it is you want
to be which is presumably a healthy and
thriving business of course it's going
to be standards of the banking industry
and the IT are that also we need an API
it's almost as though it's the only way
anybody could think of doing it so yes
it's going to be in several api's but
hopefully not 8,000 traditionally the
banks were they're very expensive and
very old IT systems are in a kind of
maintenance mode was at the time so
they've now got an opportunity to
leapfrog that thanks to the clever
developers and and some cases some of
their own there are guys within
institutions and what a few women as
well I've been sure you who are really
working on and trying to persuade their
institutions to adopt and change their
mindset or mode so the whole thing has
become a developer mindset now everybody
wants to developing
survival is one opportunity but it's
also new ways of doing things will allow
banks to put themselves back in with
that that value chain that they thought
they were getting this intermediate on
people have quite a surprising fact even
after the crash and the anti-capitalist
riots around the world in all the g7
protests and so forth
people still really trust their banks
more or less when it comes to the money
though it might be Bank a is very good
at small businesses whereas the bank
next door might be particularly good at
car loans don't you know auto financing
that's other thing you could bundle
those together you could bond it with a
thin tech is really good at doing
something on a mobile phone for instance
the only way that is going to work is
with api's because the people have to
have some sort of mechanism for
accessing the money at the end of the
day and it wasn't developers it was a
guy in the banking side of the bank so
what if we did this and then they went
got their friends who said and he said
well we can just download that we can do
whatever we need to it's the magic of
all of those things working together at
ideas firing off different types of
people so the role of the developer and
in the traditional sense changes as well
because it's making people's ideas and
business ideas come to life there are
security issues and then as you open it
wider that is going to be one of the big
issues but on the whole financial
institutions banks have been pretty good
at looking after the money
I need to be able to talk to people's
bank accounts and this lets me do that
the law says you've gotta let these
people have access to that account
there's all sorts of caveats of that
there are issues around risk and
liability and we we joke about various
hackers sitting in basements across
countries that won't name and who are
writing their own api's because that's
what hackers do so there are issues
around security and risk and that's what
banks get anyway from their issues on
mobile banking applications as you know
seeing some of the stories of ground
that and on the whole banks are pretty
good at looking out of the money so I
think that's a good of a red herring
that side of things
but it is the access to accounts that
changes things
the only other bit of BSD terms is
specifically mentioned is the robust
security on the photogate we don't know
yet collect I think early in 2017 the
the technical standards for what robust
looks like get published but it is
obviously going to be a given
[Music]
consumers will see that the benefits
first because they'll be they'll be
getting a whole new raft of services
give you a much better idea of where all
your finances are what make more
predictions and another level of control
over your your own information and you
can share that with who you need to
share that with having the ability to
use an API to initiate a transaction and
just take the money from your account
sound scarier than actually it it takes
out the risk of then having your credit
card details stolen from their databases
because they don't have the details
anymore I think the interesting thing
about piously - actually is most people
dismiss it as a fairly typical piece of
European law making and how dull is that
when you start reading it and then one
or two people write people when read
this bit read this bit about access to
accounts and all of I don't know how
many pages expose thousands of pages of
European law is translated into all
European languages but there is one
phrase in there as access to accounts
and that is what's going to change
everything
and because everybody has access to
accounts that means everybody's going to
have to work together to make sure that
those frictions
that exists between ways of doing
business are removed whatever happens
the fax machines it's a whole technology
that came and went in my lifetime that's
going to happen with other things like
payment technologies maybe credit cards
wedding system for much longer because
of the way that the rails of payment we
have in the UK we have the faster
payment system so it's instant payments
bank account to account and in the US
and Canada Australia and nearly all of
Europe by the end of 2017 are going to
have instant payment which is a way that
the technology is changed it but on top
of that you then put PSD to so now
everybody can join in and use those
rails so that's that's where it's going
to make a difference in one borough
things that come together
and caused that change because of the
volume of financial transactions that go
through here in terms of foreign
exchange and even euro transactions that
go through London that there's a huge
gap of expertise and it's probably one
of the leading places in the world for
the so-called FinTech innovator
companies there's a massive number of
very small very bright groups of people
doing very innovative things which the
bigger banks and the more sensible banks
are starting to realize they can
actually bring into their ecosystem and
help their customers and help themselves
to take to take their role back in in
the financial transaction so it's the
exciting time
[Music]
the thing about PS d2 is it's not
happening in isolation you have the
technology happening and the cultural
shifts because of the way we use and
interact with our personal technology
particularly and that works into
business as well quantity run Treasury
for large corporates are the kind of
people that already own iPads and
whatever so they expect the same
services they get with their own
personal bank accounts to be working in
their corporate banking accounts and
they expect to be able to do that from
anywhere anytime
PSB - changes everything about the way
payments are done and the way banking is
going to be done in the future which is
not bad for a little dull European law
is it I don't think that's what the
lawyers meant but they think they're
going to change much more than they
thought that we're going to change by
just adding that competition and putting
it with a mix of the technology and the
cultural changes that are going along as
well it's going to change very rapidly
Oh