Closer monitoring of financial behaviour could be a ‘win win’ for customers and banks alike, says Martin Schorel, founder & CEO of WTSS, which provides real-time insight along the entire financial transaction chain

Alternative payment networks are currently the subject of a lot of hype. Bitcoin and blockchain have the potential to transform the financial sphere, but they lack the use cases for anyone to be able to make that call just yet.

And while the outcome of these technical advances is debated, what is certain is that the new revised Payment Services Directive (PSD2) and the mandated opening of European banks’ open application processing interfaces (APIs) to third parties will have a direct impact – and soon. And yet, in many cases, it’s being treated like the elephant in the room – no one wants to talk about it.

PSD2 is set to be put into motion in January 2018, less than two years from now. So, while banks may prefer to keep their heads in the sand, they will be imminently forced to face it.

For them, PSD2 will require substantial investment; it will reduce their existing revenue channels and bring a surge of competitors. That said, there are also benefits to be had. For example, it may allow more access to customers and improve branding and integration. This in itself is not money maker though, and banks like to make money.

While the changes may not be great for banks, they are undoubtedly good for the customers they set out to protect.

PSD2, through the use of open APIs, will pave the way for new payment services and more streamlined identification processes. It will ban transaction surcharges for card payments and provide customers with an added level of security when it comes to keeping their card transactions safe.

Information = power

This is the background against which WTSS, one of the leaders in monitoring solutions for banks, is looking for ways to consolidate ‘fimotech’ (financial monitoring technology) into one information channel.

Currently, banks use many monitoring systems to keep their customers and their internal processes safe. They may use one that looks at bills paid online, another for card transactions and yet another for banking transfers. All of these solutions currently work well in isolation, but there are major benefits in pooling them, including better protection against money laundering and phishing attacks. Having one single, consistent view of the entire financial chain would not only benefit the whole community but also assist banks in meeting their obligations under new compliance regulations.

While that potentially saves banks a significant amount of money, the question is, could it be used to earn them additional revenue. That’s the question we’re now addressing at WTSS. We are currently trialling a WTSS monitor badge alongside a bank’s brand name, which lets customers know that their bank’s systems are being observed by an external monitoring solutions industry leader. A form of quality assurance, if you like, we believe this lends legitimacy and security to the process from a customer perspective, enhancing the bank’s reputation and therefore potentially increasing its customer base and, ultimately, its bottom line.

With the January 2018 deadline for PSD2 looming, it’s likely that the end of 2017 will see a mad scramble by the banks to get all their ducks in a row.

At WTSS we are confident in our ability to help deliver the integration required to meet their obligations, especially as no additional infrastructure is required inside the bank to allow us to monitor apps, websites and other interfaces.

We are also currently negotiating to become an official payment initiator, or third party payment provider, making us eligible to use a PSD2 interface so we can reach out to all banks where customers conduct business.

So while I’m not 100 per cent convinced that the banks are working fast enough on procedures, ready to implement the changes that PSD2 and open APIs will bring, I’m certain WTSS will be ready for the conversion.

Ready and waiting

PSD2 will be a game changer for certain. Its mandatory requirements will encourage banks to start doing the things that customers want; they will become more customer aware and they will be forced to recognise the things that need to change.

I also believe that blockchains will remain in the industry spotlight, with some of them be successfully adopted while others fall by the wayside.

Inevitably, there will be changes following the fall out from Brexit. When Article 50 governing the UK’s withdrawal from the European Union is finally triggered – which could be as far away as 2019 – I believe we will see more demand for the monitoring services WTSS is set up to provide, especially in the areas associated with PSD2.

There is no doubt that the future of the financial services sector holds some interesting changes. Will they all be as beneficial to customers as current thinking believes them to be? We’ll see.

What I am confident about is where WTSS is headed. Against a background of technological and regulatory change, we will continue to partner with top European banks, to make banking easier and safer for their customers.

Published in Fintech Finance Magazine volume 2 – page 60/61