The data economy of the Internet has led to most interactions becoming a transaction, according to a report from InnoPay, a consultancy firm specializing in digital transactions.
The report notes that “future relevance” for traditional banking institutions is “no longer based on payments alone.” The InnoPay team states that banks can start taking advantage of their Open Banking capabilities and can begin to “holistically” address the key components of a digital trust infrastructure – which may include digital identity, consent management, payments, and (financial) data sharing.
The report claims that these actions will allow banks to create “a much-needed customer relevance, credibility and trust in the digital transaction era.”
Payments have been an important “anchor product” for banks to “create customer relevance,” the report states. But the launch of PSD2 has brought with it a “threat of increased pressure on that relevance from third-parties who succeed in introducing new, value-added products and services,” the InnoPay team claims.
The report explains that PSD2 has required full-service banks to create and implement new technological capabilities, including digital identification, authentication, API infrastructure, developer platforms, and support services. Banks have also been focused on improving or updating existing technologies that may be leveraged “in pursuit of new business models in the Open Banking domain,” the report noted.
The InnoPay team writes in a blog post:
“It is only natural that many banks are initially focusing on their payments strategy and roadmap. They are keen to better understand how the foreseen payment products under the European Payments Initiative (EPI) fit with existing payment solutions and the possible implications of related developments such as payment initiation services under PSD2, Request to Pay and other value-added payment functionalities enabled through Open Banking.”
The consultancy firm wants to remind banking institutions that these new technological capabilities may also be used to “gain new relevance” in an open data economy in which customers maintain control of what information gets shared (including the sources it is shared from and also the purpose for which the data may be released to third-parties).
Regulatory reforms and technologies related to PSD2, Open Banking, and GDPR along with key developments like the EU Data Strategy and the digital finance strategy are now providing “access to data assets across the whole economy,” the report claims.
“In a changing world in which data is emerging as the new global currency and digital transactions are at the heart of everything we do, customers are becoming more aware of the value of their data assets; they want to leverage their data beyond the platforms and organizations that store it in order to tip the ‘data-benefit balance’ back in their own favor. This is driving customer demand for increased transparency and control over their data assets – a concept that is also known as ‘data sovereignty’.”
InnoPay recommends that banks looking to take part in this new data economy must conduct a review of their business strategy and also take their technological and operational capabilities into consideration. This begins with having a comprehensive understanding of how the data economy is evolving, their own company’s goals and vision, overall business strategy, and role within the digital trust infrastructure, the consulting firm suggests.