Why have banks been slow to comply with PSD2?

January was a busy time for financial institutions (FIs) across Europe. The beginning of 2018 saw the introduction of two key pieces of EU legislation: MiFID II and the revised Payment Services Directive (PSD2).


We’ve already reported on the efforts businesses made to comply with MiFID II before it was introduced on January 3rd, but what about PSD2? The directive aims to facilitate open banking by enabling more businesses to access consumer bank account information in order to offer third-party services.


However, a survey from Finextra and CA Technologies revealed just 58 per cent of banks across 14 European countries expected to be compliant in time for the January 13th deadline for PSD2. So why have banks been slow to adapt?


We’ve examined the report and other research to identify a number of challenges that FIs face with PSD2 compliance.

1. Perceived lack of consumer interest 

Less than one in ten banks strongly agree their customers are ready for open banking. That doesn’t mean demand won’t be there in the future, but FIs are hedging their bets they still have time after the deadline to meet their compliance obligations.


A sizeable 84 per cent of banks agree that customers are the starting point for large-scale changes within the industry, and PSD2 take-up may be sluggish until consumers begin clamouring for particular services.

2. Differing levels of board involvement

UK companies appear to be the most prepared for PSD2, with nearly three-quarters of respondents saying they would be ready on time. Meanwhile, just half of Italian and 49 per cent of German FIs said the same.


But rather than indicating apathy on the continent, the results may show that the C-suites at Italian and German firms are taking the directive more seriously from a strategic perspective.


Only 36 per cent of UK firms strongly agreed that PSD2 should be a boardroom-level discussion, compared with 64 and 43 per cent of Italian and German respondents, respectively.

3. Contradictions with the GDPR

Many FIs are concerned there is an inherent contradiction between the objectives of open banking and data privacy restrictions under the GDPR. On the one hand, banks are expected to make customer information more available to third-party providers, yet they face significant fines for data breaches.


This puts many firms in the unenviable position of either declining a request for customer account information in contravention of the PSD2, or handing over data and risking four per cent of their revenue if a GDPR breach occurs.


Some businesses may therefore be taking a wait-and-see approach to PSD2 compliance until after the GDPR is introduced in May.

4. A shortage of fintech skills

There has been a 73 per cent year-on-year surge over the last six months in vacancies searching for candidates with fintech skills, according to recent analysis from Xpress Money.


PSD2 capabilities are even more sought-after, with a staggering 311 per cent rise in the number of roles asking for people with skills in this area.


“We’re still in the early stages of the PSD2 movement, but it’s set to increase fintech innovation like we’ve never seen before and that can only be a good thing for both businesses and consumers,” said Sudhesh Giriyan, chief operating officer at Xpress Money. 


The road to PSD2 compliance

While the research suggests banks have been slow to finalise their PSD2 compliance, they appear to be taking the directive seriously. Indeed, 86 per cent of FIs in the Finextra-CA Technologies study said they believe PSD2 could be an enabler of customer innovation and responsiveness.


The changes that open banking will bring are likely to transform financial services for decades to come. So it is no surprise that many banks are taking a more measured, strategic approach to compliance.


But do they have the right skills to leverage PSD2 opportunities? Feel free to get in touch with me on 0207 936 2601 or via email ajg@barclaysimpson.com to discuss PSD2-related vacancies or any other of your compliance recruitment needs.


Our Market Reports combine our review of the prevailing conditions in the compliance recruitment market with the results of our latest employer survey.

Image: SBphotos via iStock