Today your bank is the only organization which has direct access to your personal financial data. As of January next year, new European financial regulation could fundamentally change the way we are interacting with our bank. EU’s Payment Services Directive (PSD2) enforces banks to share your financial data with third parties after you have agreed to do so. Will this disrupt the banking industry the same way as the iPhone disrupted the phone industry? What would be the effect if third parties have access to your financial data? Who owns it?
The aim of PSD2 is to increase competition and innovation in the banking industry. You keep your bank account, but third parties are able to provide services by using your personal financial data, accessing the customer’s banking account through an API. Fintechs like PayPal could offer all kind of services when they have direct access to your personal financial data. These services can be more integrated in our daily lives. Therefore, traditional banks are concerned that they will lose customers in the long run as many banks are not as innovation driven as many fintechs. Also, many traditional banks do not have an organization framework which supports a quick reaction on new developments. Furthermore, they are concerned with security problems for which they will be probably blamed. (Caplen, 2017)
In particular, the vast amounts of data could be analyzed by Big Data analysis creating many personalized services to customers. Artificial intelligence (AI) can learn from purchase behavior, creating a high-quality level of interaction with financial companies, reducing the human factor. (Guibaud, 2017)
Sharing your personal financial data is not restricted to solely financial companies but also to social networks. Think about it, what can Google and Facebook do if they have direct access to your personal financial data? Google, Apple and Facebook already have interests in financial services. For example, Google already offers a Google API allowing anyone using this API to pay using one of their cards stored in their Google account. As the market for mobile payments will continue to grow, Google and other social networks are likely to step in further when the new EU regulation has been fully implemented. With Google and Facebook involved, personal financial data could be linked to other personal data, creating a more comprehensive profile, which can be sold to the highest bidder in advertisement. So, who will own your financial data at this point? (Döderlein, 2017)
References
Caplen, B. (2017, September 19). Is open banking the industry’s Netflix moment? Retrieved September 19, 2017, from http://www.thebanker.com/Editor-s-Blog/Is-open-banking-the-industry-s-Netflix-moment
Döderlein, D. (2017, June 2). What Google’s new payments functionality really means for banks. Retrieved September 19, 2017, from http://www.itproportal.com/features/what-googles-new-payments-functionality-really-means-for-banks/
Guibaud, S. (2017, September 19). Five changes to the way people will use banks in the future. Retrieved September 20, 2017, from http://www.itproportal.com/features/five-changes-to-the-way-people-will-use-banks-in-the-future/
Yes, I think it will disrupt the banking industry. And it is already happening. New companies like Datacoup and Datawallet lets you sell your own data, including financial data, to companies for a fixed or monthly price. Financial data is worth the most. This already shows the willingness of companies to buy your financial data. It’s not really a matter of ‘if’, but ‘when’ in my opinion.