It was once again our pleasure to host our latest roundtable at the Quality Chop House in Clerkenwell, London. This time, the topic of the roundtable was PSD2 and PSPs. The lunch was hosted by David Birch from Consult Hyperion, and we were joined by some wonderful guests from Sagepay, Paysafe, Safecharge, Cifas, and ClearSettle, as well as Martin Sweeney, Mairtin O’Riada and myself from Ravelin.
We began the lunch with opening remarks from Birch on the payments industry and where the market is at currently. Birch discussed the implications of PSD2 and what it means for PSPs; what will the industry look like in 5 years, and does the UK payments market have an advantage? Birch emphasised that the UK is “dynamic, but also unstable” and that there is a lot of work to be done under the new regulation.
There was a real mix of experiences and perspectives. The discussion, as always with our roundtables, was under the Chatham House rule allowing for free and open conversation.
The topic of open banking was openly discussed over lunch. Attendees agreed that banking and payment institutions need to embrace new opportunities emerging from the regulation, and form strategic partnerships to stay competitive amidst the new challenges.
A common thread was that businesses that focus on the consumer journey and enable a frictionless experience are the ones that will stand out. Take the ‘Amazon approach’ for example. Offering great end-to-end service and convenience should be a priority for financial services. It was discussed that trusted brands and businesses will also start to take on the e-commerce approach, even a marketplace platform for their business to adhere to regulatory changes under PSD2. We’re seeing that more consumers nowadays prefer the convenience of purchasing goods online too.
In an era of change and disruption, the companies that offer a frictionless experience and focus on the customer journey are the ones that will succeed.
Identity is the new money
There was an interesting conversation on data and identity. It was debated that the companies that really know you are the big four tech companies - or GAFA as some like to call it (Google, Apple, Facebook and Amazon.) These companies aggresively analyse your data and look for trends and patterns to understand consumer trends and then cater to targeted interests.
One key talking point from the roundtable was around how businesses are consciously thinking ahead - and thinking about new technologies such as AI and machine learning to incorporate into their business model. Enabling machine learning can automate the digital identity verification, process payments and fight fraud all to better serve the customers.
There’s a lot of opportunity in the industry, but what about life after PSD2? Where does this leave the payments industry? It was discussed that the big 9 banks have two options - to either continue how they are operating, comply with the rules and get on with it, or essentially retain a distributor role.
PSD2 is a big shakeup for banking, and attendees agreed that we’re not quite seeing the effects just yet. There was a unanimous agreement that we are in fact underestimating the change it will bring. A few people agreed that there is now the opportunity for PSPs to go back to their roots, and take advantage of being an acquirer.
What will a smart PSP look like in the next few years?
There’s a range of different attributes to be considered: value-added services was one that was in common agreement, and building a trusted name in the industry such as Amazon was another one. Finding the right partnerships and collaborations with businesses will also be key, and bringing out the values of a company and cross-selling in different regions.
There was agreement that in the next few years, banking and financial services will be following payment trends in Asia for inspiration. According to the PwC State of Fintech report, “China and India are spearheading the advancements that are shaping global trends in this sector.”
“The cumulative total of fintech investments in China alone outweighs all FinTech investments made in the entirety of the rest of the Asia Pacific region. The East is now in a position to innovate and not just adopt ideas coming from the west.”
Attendees also discussed the rapid growth of online fraud as it’s the fastest growing value crime in the 21st century. Many agreed that as an industry, we’re underestimating how much value there is in data. And fraudsters go after value, not stuff - because no-one really has a lot of stuff these days - it’s all value and a lot of it is online.
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