Why skunkworks will be essential to banks in the post-PSD2 era
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 big data and 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. In terms of age, Google, Amazon, Facebook and others are embryonic 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. It would be an understatement to say that banks have a lot going for them just as they are, particularly in terms of the trust the average consumer has in them as a store of value and a source of financial advice. 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 Silicon Valley approach – nimble, iterative, rapid evolving – will be crucial to fully exploiting the opportunities post-PSD2. One solution could be in a skunkworks, a culturally separate team within the bank who are freed of some of the restrictions around governance and process, and are able to enjoy the advantages of a startup alongside the funding and support that comes from being part of a big bank.
To some extent it’s already a proven idea – 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 this idea can achieve (even if its launch wasn’t as smooth as Caixa might have hoped). Imagin may have had a rocky start, but that’s been the case for many of the tech world’s most celebrated – the key is in moving fast and fixing mistakes as they arise, and as a skunkworks team they’re well placed to do both.
The use of a skunkworks is a pragramatic 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 – and throw in the average consumers’ reluctance to change bank – and you have an organisation well positioned to deflect the inevitable encroaching of Silicon Valley post-PSD2. 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.