This is the second part of the interview The Paypers had with Nordea. The first part can be found here.
Implementing PSD2 was complex and resource-intensive. In hindsight, starting preparations even earlier than in 2016 would have been beneficial. The three-year period was challenging, and we've learned that PSD, with its evolving versions, requires ongoing readiness. Our forward-looking approach involves maintaining a substantial organisation as we prepare for PSD3.
Viewing PSD2 as a short-term project would have been a significant mistake. By early 2020, it was clear that new opinions and requirements continued to surface, leading to substantial changes. Banks, as they improve their online interfaces, must ensure alignment with PSD2. Consequently, PSD2 has remained an actively evolving area, and PSD3 and PSR are a seamless continuation.
Learning from our experiences and the desire to start earlier this time, we've already initiated work on PSD3. This preparation began even prior to the June 2023 proposal release, involving our participation in the European Commission's call for advice and feedback analysing the opinions on the matter from players like EBA. While PSD3 doesn't introduce entirely new services, it will impact multiple aspects of the Open Banking landscape, necessitating service adjustments. Starting preparations as early as possible is crucial for a smooth transition.
We've analysed the PSR and PSD3 proposals article by article to gauge their impact on Open Banking. After pinpointing the key impact areas, we've started shaping the essential business requirements for compliance. Despite recognising that regulations may evolve, our sizable multi-country bank can't afford to wait for the final legislation. Therefore, we're pressing forward, acknowledging uncertainties, and making qualified assumptions. Leveraging our experience with PSD2 and established relationships with third-party providers, we're in discussions to estimate the business requirements from PSD3. Minor adjustments may be needed once the final regulation is released, expected in about a year. This proactive approach is vital for our readiness.
Looking back to when PSD2 was introduced, it ushered in a wave of fresh ideas, third-party services, and solutions. However, the industry has recently settled into a somewhat routine state. Initially, discussions revolved around data aggregation and personal finance tools for individual consumers. Now, five years later, these themes continue, but in more refined forms. We still talk about aggregation and value-added services like credit assessments and data comparisons.
The desire is for more innovation and excitement in the industry. PSD3, while building on PSD2's foundation, aims to simplify offering these use cases and standardise operations across markets and countries. While it may not revolutionise the industry, it seeks to inject new energy into innovation.
Innovation had already begun before PSD2, particularly through screen scraping where allowed. PSD3 is expected to further invigorate an industry that, in my view, has become somewhat stagnant. Whether Open Finance will bring substantial changes and innovation in the future remains uncertain.
One key strategy is to shift away from viewing PSD2 as a short-term project and embrace a long-term perspective, similar to building a Ferrari for the future instead of a basic car for point A to point B transportation. This long-term investment and focus on the broader picture have proven successful, and I highly recommend this approach to banks that haven't adopted it yet.
Another part of the strategy involves simultaneously focusing on compliance and developing premium services with commercial potential. Look for ideas that serve compliance and add commercial value. Be adaptable and don't overly emphasise being visible as a bank. Instead, concentrate on delivering services through various channels and improving customer value. This aligns with the concept of Embedded Banking.
Embedded Banking, associated with PSD2, will continue evolving with PSD3. Banks should maintain innovative user interfaces while ensuring their services are accessible through different channels. Shifting the mindset to recognise the bank's value without the need for visibility is a crucial aspect of this strategy. However, it's a challenging shift that involves changing mindsets and delivering value behind the scenes.
There are a couple of important points to consider. First, the penalties for non-compliance with the legislation are becoming much more tangible with PSR and PSD3. In PSD2, it was challenging to explain the potential consequences of non-compliance, and the penalties were not as clear. PSR provides regulators with specific and severe penalties, both in financial and personal terms, making it vital for banks to pay close attention to compliance.
Secondly, performance will continue to be a challenge for banks. PSR suggests that third-party providers will have even greater access to data than they do today, possibly surpassing the current limit of four times per day. This places additional pressure on banks to maintain well-functioning services that are on par with their online and mobile interfaces. Balancing the need for required performance with the risk of penalties creates a significant challenge. Nevertheless, the goal is to deliver exceptional and innovative services to our customers, which is a positive outcome.
This editorial piece was first published in the Open Finance Report 2023. We encourage you to download the report and find out the latest trends and developments in the world of Open Banking and Open Finance, as the road to Open Data continues.
Sanela is Head of Open Banking at Nordea responsible for both PSD and commercial APIs. She has worked with Open Banking since its beginning in 2016 and is passionate about complex implementations and how to realise them in the most efficient way.
About Nordea
Nordea is a universal bank with a 200-year history of supporting and growing the Nordic economies – enabling dreams and aspirations for a greater good. We are the largest bank in the Nordics and with a strong market position. Every day, we work to support our customers’ financial development, delivering best-in-class omnichannel customer experiences and driving sustainable change.
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