Introduction
Since the introduction of PSD2 and the Open Banking initiative, much has been discussed about how these changes would affect banks and financial institutions. Topics like increased competition and accountability have dominated these discussions.
The Consumer’s Role
However, there has been little focus on the consumer’s position in this evolving financial landscape. Before Open Banking, surveys indicated that many consumers were reluctant to share their financial data with third-party providers. For instance, an Accenture survey found that two-thirds of UK consumers were hesitant to share their data, with 53% stating they would never change their banking habits to embrace open banking. Furthermore, a PWC report highlighted that only 18% of consumers were aware of open banking in its first six months, but it predicted this awareness to increase to 64% by 2022.
Open Banking and PSD2 Explained
To clarify, Open Banking and PSD2 are essentially the same concept, known differently in the UK and EU. Both require banks to provide standardized APIs to approved third parties, offering Account Information Services (AIS) and Payment Initiation Services (PIS).
AIS involves granting third parties access to customer account information and transactions, enabling services like real-time comparisons and personalized budgeting across multiple accounts.
PIS allows providers to initiate payments directly from one account to another, bypassing traditional payment methods.
Consumer Impact
So, how has PSD2 benefited consumers? Here are some key ways
Modularity: Open banking allows consumers to make informed choices about their financial products, offering a complete overview of all their financial activities in one app. This transparency simplifies budgeting and financial management.
Competition: Open banking fosters increased competition, resulting in better and more efficient financial products and services. Consumers have more choices and can benefit from competitive pricing.
Accountability: Data security is crucial in this new era of open banking. Concerns about accountability and data breaches require industry-wide cooperation to ensure secure data sharing, in line with GDPR regulations.
Conclusion
As Open Banking becomes more mainstream, consumers will experience the benefits of this technology. It’s an exciting time to observe how new products and applications will emerge from the wealth of data now available, ultimately placing consumers in a prime position to gain the most benefit from this evolving financial landscape.
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