# Insights

Mar 5, 2019

Use case: PSD2 compliance and beyond

Reading time: Six minutes 

PSD2 regulation in Europe is imposing banks to open access to payment accounts for free. In the UK, the regulation goes one-step further with imposing banks to expose open data such as Pricing conditions or ATM locations. And the overall objective of Open Banking is to enable financial and non-financial players (e.g. Fintech, Insurance, Retailers, Manufacturers….) to access customer accounts information (e.g. payment, credit, savings…).

Actually, this is about banks providing players with the ability to consume their services to support customer digital experiences. In such a context, banks have several strategic options:

  • To become the “first class banking services provider”, up to others players in the ecosystem to create customer digital journeys while consuming the banking services within specific steps of such journeys (e.g. Account onboarding, Payment, Loan origination…),
  • To become “customer digital journey provider”: with such an option, the bank will aggregate financial and non-financial services from the ecosystem partners in order to deliver best in class customer experience,
  • To play both above roles depending on the customer segments and geos.

Since PSD2 inception, lots of ideas and articles have been being written on the advantage of PSD2 as a first step and level playing field towards Open Banking. But when moving forward, behind the top of iceberg, there is a huge number of massive issues to address to make it happen here are few of them:

– Trust

  • Trust starts with the ability to authenticate players (individuals and companies) and make sure their authorization can be managed according to contexts,
  • Then the Authentication mechanisms such as the SCA for individuals and eIDAS certificate for TPP and other authorisation mechanisms can be used in other contexts than PSD2,
  • In digital business context, audit trailing and associated analytics will be key to develop business at the large scale with the ecosystem.

– Service openness

  • Open Banking is about better serve (ie faster and more comprehensively) and making seamless the banking service steps within the whole customer journey.
  • When focusing on services, as none can bet to be able to provide timely all elementary services, you better be able to on-board partner services so to make sure you provide the best and most evolutive APIsed services to support innovative services.
  • Openness goes also beyond as specific services can also be developed on purpose. Such development can come from the API standardisation bodies (Berlin Group, Stet, OBIE UK): they are now harnessing API extensions so that the corresponding standards go beyond the regulation.

– User experience

  • Open banking is here to support digital customer journeys so that any data/financial servicecan be accessed and used within any situation (either regulated or not).
  • Ability to combine services to provide the full customer journey is one of the challenges,
  • Making sure the consumption of services is monitored and controlled according to eitherregulation or commercial conditions is also a challenge.

Actually, Platform approach is the best way to address these various challenges, whatever position a bank or any player wants to target.
The Sopra Banking Platform is precisely implementing a Platform approach and delivers specific services to meet such business needs.

In a cloud/SaaS mode, it provides dedicated sets of API that can support any Customer Digital Journey. These sets of APIs can be:

  • Standards to address regulations (such as PSD2) and to support specific industry standards (e.g API extensions of the Berlin Group NextGen PSD2),
  • New innovative players,
  • Specifically created applications.

Basically, the SBP ensures a continuous improvement loop so that any service developed or integrated in its developer portal once can be re-used in different journeys and/or contexts which eventually delivers incremental benefits (e.g. Authentication for individuals and enterprises, analytics…).

The Sopra Banking Platform provides to banks tow levels of services matching their maturity.

– Compliance

The SBP’s PSD2 compliance off-the-shelf solution starts with Berlin Group and STET standards. It provides several key services.

  • Banks can manage PSUs’ consents,
  • Banks are connected with the PSD2 ecosystem (NCAs’ registers, QTSPs…), and take advantage of our RTS implementation,
  • Banks have access to an audit trailing of TPPs requests accessing PSUs’ accounts information,
  • Banks gain visibility on real time analytics, included in the solution by design. Hence, they know which APIs are the most used, by whom and have access to other kind of analytics addressing a wide range of specific business KPIs analysis.

– Ecosystem engagement

Beyond the PSD2 compliance, the Sopra Banking Platform leverages the open banking opportunities for banks to go further in terms of digital banking. Banks can take advantage of these others services and design new customer experiences to engage their own clients: in the Ben’s use case, Ben buys a car and related services within 3 days. In this use case, the SBP implements a digital journey which starts with Ben taking a snapshot of it on his smartphone. The app leverages the SBP APIs to recognize the car, checks his expenses capabilities and proposes him to configure a leasing adapted to his financial capabilities. Moreover, the app proposes Ben additional offers such as subscribing to a car insurance and a park-metre. Obviously, this journey is omnichannel and Ben can continue the process from his mobile, to his tablet or laptop.
The Sopra Banking Platform aims to integrate, federate and orchestrate services developed in the SBP and available in the ecosystem. This is possible thanks to the engagement of banking ecosystem players: fintechs, solution providers, and insurance for example. In this way, banks can use the ones they need to design their new customer journeys.
The Sopra Banking Platform is designed to reach the next open banking challenges, and future banks’ needs.

All these capabilities are possible thanks to the state of the art technologies integrated in the SBP: Open API, micro services architecture, Analytics… The platform is also cloud native, and delivered in the virtual public cloud. This delivery mode is the most efficient, which helps to meet several key objectives:

  • Reduce costs of services: Banks pay as they go/use
  • Ensure resilience and agility: the needs of the high -speed of banking fronts changes is independent from the mid/low speed changes of the banks’ core banking.
  • Enable fast and often improvements: banks are able to decrease their time-to-market, and design new services easily while coping to new services as well as changes in standards.

Such delivery is now mature enough to be used in the banking stringent regulatory context. We are partnering with our most advanced/visionary customers to best leverage open banking opportunities offered in the new digital ecosystems.

For instance, 2 years ago, a Belgian bank was looking for a solution to address PSD2 within their general global Digital strategy. They chose the our solution and started with PSD2 compliance and Act as TPP services in order to be ready to jump start added value services on top of PSD2 as soon as this regulation will be enforced (ie mid Sept 2019).

The SBP “Act as TPP” services enable the bank to create innovative services on top of aggregating external payments accounts information. As the result, bank’s customers will be able to easily manage their various banks accounts in the mobile banking app. And this is a starting point. Indeed, this Belgian Bank will be able to design new ones leveraging others services available in the SBP.

The cloud/SaaS delivery of the services enables our customer to focus on the business services for its end-customers rather than dedicate valuable teams on developing the IT services.

In the market, such an approach covering, ie. addressing both PSD2 and advanced digital services from start is quite unique and enables the Belgian bank to:

  • To comply with the regulation,
  • To Increase their customers’ engagement and satisfaction,
  • To create new revenues through the design of new services.