In 2018, PSD2 will finally come into force in Europe, and banks who for decades have treated their customer data as a closely guarded secret will begin turning it over to third parties. This much we know. What happens after is less clear, and in many ways it’s dependent on how banks approach the issue of PSD2 – as a problem, or as an opportunity.
Banks are sitting on an enormous quantity of hugely valuable customer and transaction data, that traditionally they haven’t always used to its full potential. The problem is to some degree cultural. Banks are storied institutions that were built in an age before sophisticated analytics, and while they do make some good use of data, the exploitation of it is not foundational and universal in the way that it is for tech giants. Chronologically, Google, Amazon, Facebook and others are infants compared to banks, but their approach to using data is anything but. Each has made information on how customers use their product instrumental to their approach to corporate strategy and design and development from the very beginning
It’s probably unrealistic to expect banks to culture shift to Facebook’s famous ‘move fast and break things’ mindset overnight – or even over the next several years – but that’s not necessarily a bad thing. Banks have other advantages, particularly in terms of the trust the average consumer has in them as a store of value and a source of financial advice. And the loyalty that many banks enjoy from their customers (even if it’s arguably partly from inertia) is doubtless enviable to many of Silicon Valley’s stars.
But even if banks remain largely as they currently are, borrowing a little of the tech industry’s nimble, iterative approach will be crucial to fully exploiting the opportunities post-PSD2. One solution could lie in a skunkworks, a culturally separate team within the bank who are freed of some of the restrictions around governance and process. Able to enjoy the advantages of a startup alongside the funding and support that comes from being part of a big bank, they can be a rich source of new ideas.
To some extent it’s already a proven concept – Spain’s CaixaBank launched Imagin last year, a ‘challenger bank’ created by an autonomous internal team. With its own infrastructure and a culture separate from its parent organisation, it’s a demonstration of what a skunkworks can achieve. Imagin has had a rocky start, but that’s been the case for many of the tech industry’s most celebrated. The key is in moving fast and fixing mistakes as they arise, and as an independent team they’re well placed to do both.
The use of a skunkworks is a pragmatic approach to cultural change for big banks – and it could help them to unlock the value in their data much more quickly. Combine the benefits of an internal, culturally autonomous team with big banks’ existing role as trusted advisors, throw in the average consumers’ reluctance to change bank. and you have an organisation well positioned to deflect the inevitable encroaching of Silicon Valley.
Even more importantly, a bank with a thriving skunkworks could stand to take significant advantage of the opportunities post-PSD2, improving customer experience and bolstering loyalty. In tech terms, that’s becoming ‘stickier’. Those who can use such a technique to capitalise on PSD2 will be the stickiest of all – and the prizes will be great indeed.
At Vipera, our unique software and services are helping big banks around the world prepare for PSD2. Talk to us about how we can help you or your clients be ready.