Recently, I attended the xCEEd conference in Belgrade – the leading FinTech event in Central and Eastern Europe. The theme of this year’s conference was “Road Mapping the Digital Future”, focusing on the practical application of financial technologies in CEE.
Supported by the UK Department for International Trade, this is the second year that this event was held in Belgrade. Covering a wide range of topics concerning financial technologies, this year’s conference also focused on the future of banks and their relations with FinTech, Blockchain and the role of millennials in this area, as well as the future of competition and relevant regulations.
Along with the EU and the other countries in Central and Eastern Europe, Serbia is also making giant strides towards complete digitalization – creating the material conditions, man-power and regulations. It seems certain that the financial sector is undergoing huge changes.
The PSD2 directive
In the beginning of 2018, the Revised Payments Service Directive (PSD2) came into force in the EU and it has the potential to change not only how we treat data, but also the way we see banking and financial services. For a bit of background: the Payments Services Directive (PSD) was adopted in 2007 to create the Single Euro Payments Area (SEPA). Its’ aim was to simplify and modernise the rules and guidelines for money transfers within the European Union.
PSD2, its’ update, was passed by the European Parliament in 2015, with the goal of further promoting innovation while enhancing consumer protection. And the implementation of PSD2 will open the doors for the various startups in the FinTech niche to play a more important role.
Banks and Banking
This directive enables bank customers, both consumers and businesses, to use third-party providers to manage their finances. This means that companies, like Amazon, could retrieve your account data from the bank – with your permission of course, so that when you buy something, the company can make a purchase for you, without having to redirect you to another service – like Mastercard of Paypal.
And this will, in turn, break down the bank’s monopoly on its users’ data. By this I mean that banks will no longer be competing only against other banks, but everyone offering financial services – changing the payments value chain, what business models are profitable, and customer expectations. Retailers will be able to ask you for permission to access your bank account – no more intermediaries.
The role of Blockchain
PSD2 will also affect, and possibly help, the successful development of Blockchain projects and create new opportunities. In essence, this regulation is about the sharing of personal data with a network. Currently, EU laws see the transfer of data being handled through Application Programming Interfaces (APIs). But, by using a private Blockchain, the transfer can be done in an open and secure manner. This way, FinTech services, retailers and banking institutions could all use the same system to share customer information.
This system would be limited to network participants, and decentralised storage and transparency would enhance security and ensure good behaviour. To some, this seems a better option than a system in which banks control account data and cede information to a user-approved entity.
Innovation is a rapidly moving force, pressing the financial sector to keep up with the technological and regulatory changes. Today’s tech-savvy consumers are demanding faster, less formal, more personalized, easy accessible financial services.
And, while we still cannot predict all of the changes in practice that the introduction of PSD2, various technological innovations and changing customer demands will bring, it seems certain that interactions between consumers, producers, creators and among citizens, businesses and administrations are being reshaped.