PSD2: Making it actionable

PSD2: Making it actionableWebinar Wednesday July 27th, 2016

Overview

What is PSD2

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What is PSD2?

PSD2 is short for ‘Second Payments Services Directive’, a new European regulation that says banks have to allow a secureway for customers to authorize a third party provider to have direct access to:

§Account and transactional data§Make and authorize payments

What is PSD2?

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What is PSD2?

PSD2 will impact how we access our finances

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Labor intensive task of getting complete overview of financial status across banks.

Before PSD2

What is PSD2?

PSD2 will impact how we access our finances

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‘Account Information Service Providers’ (AISPs) can offer direct insight in all products and transactions across banks.

After PSD2 adoption

What is PSD2?

PSD2 will impact the flow of payments

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Consumer

Issuing bank Card Scheme Acquirer

Merchant

Before PSD2

What is PSD2?

PSD2 will impact the flow of payments

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Consumer

Issuing bank

Merchant

After PSD2 adoption

Parties can act as ‘Payment Initiation Service Provider’ (PISP) or work with a PISP to simply the flow of transactions and payments.

Overview

Impact of PSD2 on banks

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PSD2 Timeline: Aiming for Q4 2018

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December 2015EBA released discussion paper on authentication and secure communication

June – Sept 2016 (est.)Consultation period on draft RTS*.

January 2016PSD2 is published in the official journal of the European Union

January 2017Deadline for EBA to submit RTS on authentication

April 2017 (estimate)EBA RTS adopted bycommission

October 2018Deadline for EBA RTS Compliance for ASPS, PSPs and Authorities

January 2018Deadline for member states ofthe EU to transpose PSD2 aslaw across 28 member states.

2015 2016 2017 2018

Banks have 18 months to comply to RTS

* RTS = RegulatoryTechnical Standards.


1. EU sets regulation and defines technical standard 2. EU member states to turn this into national laws3. Banks to comply before October 2018 (estimate)

1. Third party authentication2. Third party access to Payments (transaction requests)3. Third party access to Account information (balances and

transaction history)4. Fees Transparency5. Fine grained entitlements

So, what needs to happen?

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PSD2 will change to competitive landscape

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Strategy: Proactive vs Reactive

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§ There is a choice: do you implement the minimum requirements to fulfil PSD2 (reactive) OR do you embrace the change and modify your business model (proactive)?

§ PSD2 is significant market disrupter and early adopters will shape the market

Proactive / Disruptor Bank§ First top adopt open APIs§ First to welcome 3rd party

developers / ecosystem§ Accept commoditization and find

new differentiators

Reactive / Disrupted Bank§ Meet the essential criteria§ Rest is business as usual§ Have defensive and delay

strategy to 3rd party's


Proactive banks: move to public API’s

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API

Overview

Banking API Economy

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Banking API Economy

Back Office Functions

PRODUCTS& IT SYSTEMS

Future = Two Speed Architecture

Existing Systems(Silos)

Customer Experience

Agility

Flexible Customer Journeys

API

Banking API Economy

Future = Two Speed Architecture

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Backend

Digital Customer Experience Platform

SOA / Middleware layer

System of Record

Year

sM

onth

s

EmployeeApplications

Partner Apps

CustomerApps

"Internet of Things"

Days

Database

API EXPOSURE

API CONSUMPTION

Banking API Economy

Opportunity: Build Connected Experiences

Next GenerationConsumer Experiences

PFM, card linked offers

Work with FinTech VendorsP2P lending, Wallets, New

Apps, IoT, etc.

Access control, and risk management

Reduce risk through access control, metering

of enterprise assets

Outside-in BankingCross Banking Aggregation, Multiple contextual financial

apps Alternative models inWealth management

Robo-advisors for affluent segments

Deposits LoansInvestments PaymentsThird-party

services Other Banks 17

API

Customer Controlled

Account Aggregation&

Customer Data Hub

Banking API Economy

Opportunity: Complete Customer View

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Banks FinTech Apps

data

data

data

data

data

data

Banking API Economy

Opportunity: Integrate FinTech Capabilities

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API LayerConnecting to 3rd parties,

Selecting the best offer / service

Omni-ChannelDigital Banking

Platform

Core Banking

Banking API Economy

What is the Business Model / ROI?

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Revenue-sharing models (API provider pays developer)

Fee-based models (API provider charges developer)

Freemium models

Fixed

Flexible

Hybrid(flat fee plus fixed or flexible)

Transaction

One-time

Subscription

Duration

Quantity

Hybrid

Transaction Volume

Custom Attribute

Advance / Arrears

Pro-rated / Full amount

Overview

PSD2 Roadmap

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PSD2 Roadmap

PSD2 Timeline: Aiming for Q4 2018

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December 2015EBA released discussion paper on authentication and secure communication

June – Sept 2016 (est.)Consultation period on draft RTS*.

January 2016PSD2 is published in the official journal of the European Union

January 2017Deadline for EBA to submit RTS on authentication

April 2017 (estimate)EBA RTS adopted bycommission

October 2018Deadline for EBA RTS Compliance for ASPS, PSPs and Authorities

January 2018Deadline for member states ofthe EU to transpose PSD2 aslaw across 28 member states.

2015 2016 2017 2018

Banks have 18 months to comply to RTS

* RTS = RegulatoryTechnical Standards.

PSD2 Roadmap

Build or Buy a solution that enables:

§ Third party Authentication (oAuth + 2FA)§ Entitlements - Flexible and fined grained access control§ API versioning and management§ Fraud and penetration monitoring§ Developer tools (SDKs, sandboxes, documentation)

§ Align on -- or select, an clearly defined API standard

PSD2 Ready – Shopping List

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PSD2 Roadmap

1. You don’t have to wait for the regulations to be final. It is going to happen, and technology selection and implementation can already start today.

2. You don’t have to limit the scope to PSD2. Be open and creative in what APIs and services to enable for 3rd party developers and partners to find new business models and mutual benefits.

3. Experiment. Get in a ‘lean startup’ approach to this, with smart technology to see what works and sticks. Be open.

PSD2 Roadmap

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Overview

The Backbase Vision

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The Backbase Vision

Mission: We empower Financials to accelerate their Digital Transformation

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The Backbase Vision

Raising the Bar – Superior Experience

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Empowering the Self-Directed Customer

BACKBASE: Omni-Channel Banking

ExistingSystems

PSD2 enabled banks

Customer Experience & Digital Banking Services

OLB Mobile

Seamless Omni-Channel JourneysRetail BankingBusiness BankingWealth Management

The Backbase Vision

Digital Banking API Layer – INTEGRATE & EXPOSE

FinTech Providers

Open APIs

The Backbase Vision

BACKBASE: Build Connected Experiences

Open API Layer

Omni-ChannelDigital Banking

Experience

Core Banking

PSD2 Enabled Banks

The Backbase Vision

BACKBASE: Business Model Agility

Scenario 1Digital CX

DigitalBanking Core Systems

Scenario 3Aggregator

BankingServices

Aggregator

PSD2 enabled banks

Fintech Providers

Fintech Providers

Scenario 4Omni-Channel

Omni-ChannelBankingPlatform

PSD2 enabled banks

Fintech Providers

Fintech Providers

Core Systems

Scenario 2New Digital

Built-for-Digital Banking Platform LeanCore

Customer Experience Solutions. Delivered. The Backbase Vision

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Forrester Market Wave for Omni-Channel Banking SolutionsJost Hopperman

“Backbase leads the Pack”

ü Broad business capabilities, ü Rich customer experience, ü Very solid technology ü Very solid architecture

Recognized as Innovation Leader

Q&A

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Thank you!Jouk Pleiter, CEO & Co-Founder, [email protected]

Jelmer de Jong, VP Product Management, [email protected]