So the second Money2020 Europe event has now closed and everyone is heading home. Following my blog about the opening sessions, here are my impressions of the key themes from the last three days. The topics I heard most about are PSD2, APIs and the impact on banks and fintechs, the direction of security and identification, and the impact of AI. But with five tracks over three days, this is just my window into a lot of debate.
PSD2 and APIs
PSD2, APIs and the requirements of strong customer authentication naturally received a lot of attention. There was general consensus that there needs to be some standardization on APIs, otherwise the third-party processors will have a nightmare situation in needing to connect using many hundreds of interface definitions. The UK initiative, where a cross-bank collaborative team is defining a common set of APIs, was applauded.
Banks and fintechs – what does the future hold?
The discussion led to identifying a key difference between banks and fintechs. The former do 1,000 things averagely for a broad range of customers, whereas the latter do one thing really well and that is often for a very specific, narrow audience. So there is a major difference in the approach to and application of technology.
But the more interesting debate was whether, because of fintechs, banking services are going to be unbundled so consumers and SMEs will spend time searching the market for the ideal provider of a particular product. Few people, especially leaders in small business, have the time or the inclination to hunt for the most ideal product. It was felt that, generally, banks will continue to act as a vendor of a wide set of products but some will be provided by fintechs, with the bank brand acting as the validation mark for the third party.
But then there was debate about whether banks will survive. A key element is the legacy IT infrastructure of many banks. Those that grasp the problem and deploy modern technologies, perhaps involving payment hubs which we have written about elsewhere on this site, are the ones that will survive.
Interestingly, some commented that banks have not understood what is happening in meeting the PSD2 regulations. And one of the problems is the P – payments. While this regulation does involve payments it is much more about the digitization of the bank, which impacts many departments and not just the payment group. Again those that embrace this are going to be the survivors.
The authentication challenge
Of course no debate on digitization could ignore the challenges of security and the requirements of strong customer authentication. Ideally a single digital identity is needed for everyone. But who will drive that? In India the government has ensured this is delivered as an element of opening up access to banking services. Elsewhere that has not been deployed yet so the technologies used in online and mobile banking will be deployed along with the revised 3D secure protocol for cards. But until the regulatory technical standard is actually published it will be guesswork as to what techniques are acceptable.
AI and the data revolution
Finally, the applicability of artificial intelligence to payments and banking was widely discussed. From helping consumers and SMEs plan their finances and avoid overdrafts to assessing the risk behind a transaction, AI clearly has a significant role to play. The opportunity is just beginning to be realized. But this leads to lots of other questions, such as are people happy that their data is being used in this way? Does the consumer really own the data, how important is voice interaction in this environment, and will people trust the outcome of the AI? Clearly a theme for the next Money2020 Europe.
One of the speakers summarized well the excitement felt at Money2020. Having been through the agricultural and industrial revolutions in earlier centuries we are now at the start of the data revolution which, as with previous revolutions, is going to significantly change the way we live and work. How we use data as businesses and consumers has started a revolution in how services are provided and consumed. And that is a challenging but exciting prospect.