The Value of User Experience in Responding to PSD2
The impending regulations known as PSD2 have given rise to huge amounts of speculation amongst banking strategists - should they simply comply with the rules on data sharing, or embrace the changes and prepare a more visionary approach to their newfound interdependence, based on user experience and thoughtful interaction design.
According to a recent PWC survey, 68% of bankers think that PSD2 will weaken their position, but perhaps this reflects an aversion to change, more than a recognition of the facts.
PSD2 will reduce barriers to entry in the payments sector by opening up banking data to a host of TPPs (Third Party Providers) allowing them to:
Initiate direct payments from your bank account without you having to continually input your card details, or, Gather data for supplementary money management tools such as financial dashboards.
This brings a degree of uncertainty to a retail bank’s role in online payments but the levels of negativity are possibly overhyped.
It sometimes seems forgotten that PSD2 originated as much to regulate existing TPPs as to promote new ones, recognising that new entrants were beginning to blur the lines of who is liable for fraudulent payments: customer, third party, or bank.
So when open data does create new opportunities in the payments chain, the new TPPs will be bound by stringent security regulations stopping them from acting alone.
The draft Regulatory Technical Standard (RTS) states that all Access to Accounts based transactions will still have security dictated by the Bank - emphasising that the banks will remain in a strong position with regards owning the transaction dialogue and sharing ‘screen time’.
This is apparent in existing payment initiators who make service agreements with individual banks. Netherlands based iDeal, is a prime example of both a current TPP and how the competition may look after PSD2 - sharing screentime with the partner bank rather than commandeering it as their own. After clicking the iDeal icon, the user is redirected to their bank’s login page where they input their usual security protocols to issue a payment - resulting in potential gains for both the bank and the TPP.
Account Initiation Service Providers (AISPs) which consolidate accounts into services like financial dashboards - Mint, Moven etc - seem more of a threat to the banking sector’s dominion of the customer interface.
By aggregating all of our accounts in one place, they could essentially become the common interface from which we control our finances.
As well as becoming our quick account reference for the likes of balance checks, AISPs could disintermediate banks from cross-selling their own financial products, which would drastically undermine an essential revenue stream.
These types of AISP are big in the US but so far they are fairly unique to that particular geography - UK banks have tended to make it explicit that sharing login details invalidates any insurances or cover they may receive from the banks themselves.
Broadly speaking, challenger banks will move quickly to embrace the full scope of the changes, with far more to gain from an interdependent business model; the more established banks should be considering how they can leverage their customer base in terms of brokering partnerships and pulling the strings as an AISP.
The industry as a whole should be considering how their user experience, specifically login, will transpire via the added layers of a TPP. This could place fresh emphasis on designing novel approaches to seamless and adaptable security protocols based on the value of a transaction, perhaps using quick biometrics for simpler authorisations. Security can also be the way for banks to reassure their customers that they’re best equipped to manage new payment options.
Retail banks will need to monitor user perceptions of their product range, which will begin to operate on a number of added fronts with more complex interactional dimensions. In order to stay competitive in this expanded marketplace of third party apps offering convenient user-centric designs, banks will need to supplement their in-house design skills with a much more scientific brand of user experience and service design.
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