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Why we’re nowhere near delivering on PSD2’s bold ambition


One year on, the directive is yet to deliver on its promise and we’re nowhere near the vision that consumers were promised. PSD2 was the start of a seismic shift in the financial world. The legislation was greeted with derision by some and delight by others, but whatever your opinion, one thing was clear: the ambition was to deliver better services for customers. 

Why? Three key reasons:

 1. Banks aren’t willing to change

Nobody expected the banks to host a no expense spared PSD2 kick-off party and invite every fintech startup to come along. But when the 13th January deadline rolled around only four out of nine banks operating under the UK’s CMA were ready on time.

A lack of preparation before the deadline left them on the back foot and they’ve struggled to change course. Even now there are banks that still aren’t meeting the minimum expectations required under the directive.   

Rather than obsessing over finding their next fintech acquisition, banks need to change their attitude and embrace the new world order. Without adopting a more customer focussed model - the very thing that PSD2 was designed to do - banks will continue to struggle to compete with newer, sexier fintechs.

2. Fintech providers keep bank bashing

Fintech startups stand to reap huge benefits from PSD2. However, their frustration with glacial adoption of the directive by the banks has led them to turn up the heat on the bank bashing that they’ve long been associated with.

Whilst it’s frustrating to watch banks procrastinate, criticism isn't helping. Instead, they should be getting their own house in order so that they’re prepared when a financial giant comes knocking with an offer that’s too good to turn down. By eliminating distractions and continuing to focus on their obsession with providing the best service to customers fintechs will find that PSD2 delivers for them just as much as for their customers.

3. Consumers don’t understand it and aren’t seeing the benefit

YouGov data shows that a massive 72% of UK adults haven’t even heard of Open Banking. And those that have heard of it would be forgiven for asking what - if anything - has changed over the past year?

Education is still needed and consumers are losing interest.  

Banks should be doing more to reassure people that opening up will not compromise their security. But in reality, the only thing that will convince consumers once and for all that positive change is coming is the introduction of new products.

Until then banks need to keep their customers updated and try to tackle their concerns about data privacy head-on. If they don’t, when new products are finally introduced they run the risk of being misunderstood or rejected entirely.

Now’s the time to collaborate  

With any regulation there’s an acceptable bedding in period, but neither the legislators or consumers will remain patient forever.

It’s time to leave egos at the door and play nice. Banks need to embrace Open Banking with the spirit with which it was intended. And fintechs need to get rid of that chip on their shoulder and start investing in partnerships for the greater good.

Both sides have to give a little and explore well structured and complementary partnerships that have the customer at heart and deliver the innovation that has been promised for so long.




Comments: (4)

Ambrish Parmar
Ambrish Parmar - Thought leader and Start-up Advisor - London 24 January, 2019, 15:08Be the first to give this comment the thumbs up 0 likes

Hi Mike

Nice post - I concur. Custoner value has been poorly articulated and Open Banking / PSD2 could end-up like account switching - poor penetration and therefore limited impact. Keep posting, Ambrish - Group Owner

A Finextra member
A Finextra member 24 January, 2019, 17:27Be the first to give this comment the thumbs up 0 likes

Agreed. Financial regulation is so rarely understood because of the way it's communicated. Thank you for your feedback!

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 24 January, 2019, 18:31Be the first to give this comment the thumbs up 0 likes

Open Banking is supposed to be the answer for the supposedly chronic craving of consumers to get more value from their banking data. If the premise of Open Banking is right, it's human nature for consumers to not only know about Open Banking but also to be looking forward to it. More in this comment. If customers need to be educated about Open Banking, then Open Banking is Dead On Arrival. IMO, Open Banking Needs A Blockchain Boost.

Ralf Ohlhausen
Ralf Ohlhausen - Pay Practice - Stuttgart 25 January, 2019, 11:52Be the first to give this comment the thumbs up 0 likes

Rather than reinventing Open Banking, the UK should have looked at other EU countries practicing it for over 10 years already and having very successful bank-agreed payment execution services (PES) and bank-independent payment initiation services (PIS).

Listening to their advice and not taking the worst of both worlds, would have helped to understand the difference between the two and what needs PSD2 licensing and what not.

Rather than prescribing a “user experience” it is of paramount importance to leave this area to innovation and competition. After all, that’s the whole point of Open Banking!


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