Three issues European banking can no longer ignore

Last updated: 31 October 2019

The European financial services sector is shifting fast, and recent developments mean that standing still in no longer an option for any institution hoping to remain relevant.

We’re speaking at Money 20/20 Europe in Copenhagen this week, to discuss the following three issues that no one in financial services should avoid. If you’re interested in getting in touch during the show, do let us know.

Changes to the Payment Services Directive

European regulators are close to agreeing revisions to the Payment Services Directive, or PSD2. This will have a profound effect on the industry. One aspect of the directive will mean that many intermediaries in the payment process will no longer be needed.

Retailers will be able to ask consumers for permission to use their bank details via new software APIs. Once you give permission, the retailer will receive the payment directly from your bank—a far more direct process than today.

And for those with multiple accounts across a number of different banks, PSD2 will introduce Account Information Service Provider or AISPs, that will allow you to view all of your multi-bank details from a single portal.

There are other changes too, such as the requirement for greater authentication, banning surcharges on card payments, and improved protection against fraud.

The banking industry will change, and new, more agile players—especially fintech start-ups—are poised to mount a real challenge to incumbents for the share of their customers’ increasingly digital wallets.

Millennials embracing digital and mobile

The European banking revolution is also being fueled by wider social and cultural trends. The Millennial generation has grown up in this digital era, and its perceptions and expectations of the banking industry are far removed from those held by their parents.

These consumers are not only tech-savvy, but also more discerning and less brand loyal. Furthermore, they are characterized by an assumption that near-instant service delivery should be the norm, and have a strong desire to be recognized and treated as individuals. Check out this video, to learn about their attitudes to mobile banking that summarizes our recent research into the subject.

This presents an issue for banking institutions that are battling legacy IT infrastructure, and the cost involved in moving to more customer centric models. In theory, banks and credit card providers know everything about our lives, so if the insight can be drawn out of the data, we could soon see a far more tailored experience.

But again, the worry is that big institutions will find it hard to pivot, and they could see their market share gobbled-up by challengers directly appealing to millennials looking for a personalized service.

Winning consumer trust in an era of constant security breaches

Last year, we saw over 700 million personal data records compromised across 1,673 data breaches. As we approach a fully digital world, customers are increasingly questioning who owns their data—and whether it is secure, and kept private.

The more we do our banking online or via an app, the more we risk becoming separated from the provider. If there is a problem or issue to resolve, firms need to build trust that everything can be handled quickly and effectively. But with new technology and services, it can often be hard to know who to contact if an app fails. We trust our payment cards wherever, and whenever, we use them. Fintechs and large institutions must work to ensure that new services have the same high-levels of performance and trust.

The changes in European banking are as profound as they are rapid. Using the latest wave of technologies, services and support, banks and fintechs undoubtedly have the means to secure their business operations from the edge to the core. Applied correctly, this can also be combined with the immediacy and agility expected by the 21st century customer.

Financial services providers will have to marry the digital and physical banking domains, and build trust while revolutionizing the end-user experience. In doing so, they will put themselves in the perfect position to attract and retain more clients, boost revenue streams and profitability, and reduce the costs typically associated with both opening and managing customer accounts.


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