The PSD2 requirements have been absorbed, timelines understood and API transformation programs been kicked-off. So, what next?
With a deluge of regulations that threaten to disrupt existing revenues coming their way, banks can at least view PSD2 as one directive that opens up new opportunities and business models for them to employ. The risk is however that by focusing solely on the more immediate API compliance project, banks remain oblivious to the threat from up and coming fintechs.
There are so many different types of fintech out there, each with their own specialist niche, looking to chip away at the revenues that banks take for granted today. So much so, that we’ve labelled them Pac-Tech, although we don’t expect this term to stick. For these Pac-Techs, the open API regime as prescribed by PSD2 is akin to eating a ‘power-pellet’ in the iconic 80s arcade game, enabling them to eat all that they see before them – namely the banking industry’s lunch.
In our illustration we’ve highlighted 10 types of fintech that are an immediate threat to banking revenues, but this list is by no means exhaustive.
Build, Partner Buy – Bank-as-a-Platform
By embracing the bank-as-a-platform model, banks can still put themselves at the centre of the open-API economy. In setting out on the path to becoming more like fintechs, banks have three choices. For those business lines where revenues might be disrupted, should they Build, Partner or Buy? It is the age-old conundrum that has vexed software-acquiring CIOs over the years, and it applies equally to today’s open-API business models.
Perhaps the bank’s innovation department is lean enough to develop fintech products at the speed or cost of a lean start up, in which case build might be the answer. Or it sees potential in the core product offering of a new fintech and is willing to partner with them to see if those ideas become revenue earning. This could be done via an accelerator program, in-house venture fund or a partner API- developer program. Or the bank sees an outright and immediate threat to an existing business line and decides to buy the disruptive Fintech outright.
All of these are valid strategies to employ under a future open-API banking ecosystem. But they are strategies banks need to embark upon today, and not just when their API business transformation programs have been completed. To wait for this would allow the Pac-Techs to get one step ahead and to consume all they see before them.