# Open banking: What it means for you and the industry
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2019-03-28
Category: BANKING
Category URL: https://financedigest.com/category/banking
Meta Title: PSD2 and Open Banking: A Year On
Meta Description: Explore the impact of PSD2 on the UK banking industry, including the rise of open banking, partnerships between banks and fintech firms, and innovative
URL: https://financedigest.com/open-banking-what-it-means-for-you-and-the-industryhtml

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By **Nathan Baranowski**, Managing Director at OJO Solutions

It’s now a year since the introduction of the second Payment Services Directive (PSD2): a new regulation that forced the biggest banks in the UK to give customers the key to their financial data. Established to accelerate the shift towards ‘Open [Banking’,](https://www.financedigest.com/emerging-global-trends-in-digital-finance-and-banking-innovation.html) this package of reforms imposed by the CMA put customers in the driving seat, allowing them to control which third parties gain access to information such as spending habits, regular payments and preferred companies.

![Nathan Baranowski, Managing Director at OJO Solutions](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/nathan-baranowski-ojo-solutions-450x301-1736839081891-compressed.jpg)

Nathan Baranowski, Managing Director at OJO Solutions

In turn, providers of cutting-edge budgeting apps and online financial platforms are able to harness this data to enable innovation in financial [services and improve the customer experience](https://www.financedigest.com/financial-services-is-upping-its-customer-experience-game.html "Financial services is upping its customer experience game") – providing they have permission. Central to the CMA’s regulatory reform has been to ensure customers can fully benefit from the [digital transformation](https://www.financedigest.com/how-to-create-value-in-digital-transformations.html "How to create value in digital transformations") that has swept the sector while enabling smaller firms and new entrants to compete more fairly.

Since then, following the introduction of PSD2, what [changes have been felt in the industry](https://www.financedigest.com/plaque-disclosing-aids-market-important-changes-in-industry-dynamics-during-2022-2028.html "Plaque Disclosing Aids Market Important Changes in Industry Dynamics during 2022-2028")?

**Greater innovation**

In response to the advent of [open](https://www.financedigest.com/open-banking-slow-and-steady-wins-the-race.html) banking, Amazon commenced talks with American banks such as JP Morgan Chase to create a [digital](https://www.financedigest.com/citigroups-head-of-digital-assets-for-markets-unit-departs-memo-says.html) checking account for young people and those without a current account. Their aim? To make banking more accessible and offer retailers the option of Amazon Pay as part of the checkout process. Naturally, expectations have been high since Amazon began flexing their muscles in the finance space, and [big banks](https://www.financedigest.com/factbox-big-banks-expected-to-rack-up-more-than-1-billion-in-fines-for-whatsapp-use.html "Factbox-Big banks expected to rack up more than billion in fines for WhatsApp use") have woken up to the threat they pose in the future – but the challenge won’t diminish through avoidance.

According to a [report from Bain & Co](https://www.bain.com/insights/can-amazon-take-customer-loyalty-to-the-bank/), about two-thirds of Amazon Prime members said they would gladly try a free online banking service from the e-commerce giant. Perhaps unsurprisingly, conventional banks are rising to the challenge – in the words of Gerard du Toit, partner of Bain & Co, they’re focused on “Amazon-proofing” their businesses because they recognise the potential that companies such as these can have in cornering the market and setting [customer expectations](https://www.financedigest.com/how-omnichannel-cx-can-help-insurers-meet-customer-expectations.html "How omnichannel CX can help insurers meet customer expectations").

For banks willing to embrace change, the opportunity that [Open Banking](https://www.financedigest.com/why-open-banking-is-safe.html "WHY OPEN BANKING IS SAFE?") and PSD2 provide are undeniable: by encouraging competition from tech giants, traditional providers will be forced to innovate their core services in order to enhance their customer experience and stay front of mind to those who have been loyal over the years.

**Industry collaboration**

So far, open banking has encouraged the creation of partnerships between conventional banks and plucky fintech start-ups, [PwC reports](https://www.pwc.com/gx/en/industries/financial-services/publications/fintech-is-reshaping-banking.html). Until recently, agile [market entrants posed a threat to high street banks; leaders of traditional firms feared their technology-led counterparts would far outpace them in market share](https://www.financedigest.com/the-stem-cell-banking-market-to-keep-up-the-digitized-momentum.html "The Stem Cell Banking Market to keep up the digitized momentum").

According to their [US Digital Transformation in Financial Services study](https://www.ojosolutions.com/umbraco/pwc%20us%20digital%20transformation%20in%20financial%20services), PwC reveals that incumbents are now recognising their own strengths, and start-ups are taking heed: in an industry well known for strict regulation, scalability is facilitated through strategic partnerships with well-established banks.

Already, open banking has forced high street banks to open up their data to third parties – as collaborations between both sides of the profession ramps up, customers are set to benefit from increasingly personalised services while banks and [businesses](https://www.financedigest.com/philanthropy-is-an-underrated-tool-for-growing-financial-services-businesses.html "Philanthropy Is an Underrated Tool for Growing Financial Services Businesses") can use sophisticated data to inform decisions about the services they build and sell. With all parties playing to their strength, the new open [banking landscape now looks promising rather than threatening to leaders](https://www.financedigest.com/digital-trends-for-banking-leaders-looking-to-compete-in-2022.html "Digital trends for banking leaders looking to compete in 2022") in the sector.

**A new** [age in banking](https://www.financedigest.com/how-fs-organisations-can-enter-the-new-age-in-digital-banking.html "How FS Organisations Can Enter The New Age in Digital Banking")

While open banking may prove successful in achieving its objective to encourage competition, it’s the action that traditional [banks take today](https://www.financedigest.com/stress-testing-why-did-my-bank-go-bust-today.html "STRESS-TESTING – WHY DID MY BANK GO BUST TODAY? ") that will determine their sustainability in the face of digital and regulatory transformation. Already, forward-thinking providers are [identifying areas](https://www.financedigest.com/identifying-areas-of-vulnerability-why-cybersecurity-shouldnt-be-an-afterthought-for-financial-organisations.html "Identifying areas of vulnerability: Why cybersecurity shouldn’t be an afterthought for financial organisations") of their operations in which there is room for improvement; they are eagerly making adjustments, striking partnerships and seeking ways to turn mundane activities into exciting experiences in order to keep their customers engaged.

For some, this means complete infrastructural change. For others, it means the exploration, experimentation and implementation of cutting-edge digital capabilities offered by [fintech start-ups](https://www.financedigest.com/how-partnerships-between-fintech-start-ups-and-traditional-banks-herald-a-brave-new-world-of-opportunity.html "How partnerships between FinTech start-ups and traditional banks herald a brave new world of opportunity") into their service offering. In any case, one thing is clear: the future of finance has arrived, bringing seamless customer experiences and driving [competition from every corner of the market](https://www.financedigest.com/stone-paper-market-competitive-growth-strategies-based-on-type-applications-end-user-and-region.html "Stone Paper Market Competitive Growth Strategies Based on Type, Applications, End User and Region"). How banks respond to this fast-moving landscape will make all the difference in their [long-term success](https://www.financedigest.com/the-journey-to-cloud-native-overcoming-hurdles-to-drive-modernisation-and-achieve-long-term-success.html "The journey to cloud-native: overcoming hurdles to drive modernisation and achieve long-term success").

At OJO Solutions, we help organisations to implement [technological solutions that meet](https://www.financedigest.com/meeting-of-minds-using-technology-to-reimagine-mental-health-support.html "Meeting of minds: Using technology to reimagine mental health support") their unique objectives. Should you need advice or support through digital transformation, [get in touch](https://www.ojosolutions.com/contact-us) with a member of the team today.


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