DIGITAL TRANSFORMATION Global Back Office / … · Global Back Office / Operational Efficiency Summit . NEW PAYMENTS REGULATION ACCELERATING DIGITAL TRANSFORMATION. Nils Jung I November
Post on 21-Sep-2018
228 Views
Preview:
Transcript
Global Back Office / Operational Efficiency Summit
NEW PAYMENTS REGULATION ACCELERATING DIGITAL TRANSFORMATION
Nils Jung I November 2016
2 Global Back Office & Operational Efficiency / Payments Regulation Accelerating Digital Transformation – Nils Jung. November 2016. © Innopay GmbH. All rights reserved.
• Founded in 2002 – partners: Shikko Nijland, Douwe Lycklama, Martijn van den Corput, Nils Jung
• Offices in Amsterdam (HQ) and Frankfurt
• 30+ consultants plus international network of associated experts via EPCA network (picture left top)
• Excels by combining Business, Technology and Regulation capabilities (picture left bottom)
• Three core practices: Payments, Digital Identity and E-Business
• Three core innovation services: Strategy, co-creation and transformation
• Geographical focus on EU
• Member of a.o. EBA, ECP and EPCA
• Founding member of Holland Fintech
Innopay is innovation expert in Payments, Digital ID, E-Business that outperforms by combining Business, Tech and Regulation capabilities
3 Global Back Office & Operational Efficiency / Payments Regulation Accelerating Digital Transformation – Nils Jung. November 2016. © Innopay GmbH. All rights reserved.
PAYMENTS DIGITAL IDENTITY
E-BUSINESS SAMPLE ASSIGNMENTS
Innovation Services
Core practices
Strategy
Co-creation
Transformation
• Market and product assessment • Multi-sided platform design • Vendor and solution selection
• Co-creation of products and services • Developing platforms for co-creation • Building co-creation capabilities
• Content-based project management support • Opportunity based operating model improvement • Digital change and migration management
Innopay’s service portfolio ensures clients can count on us throughout the whole digital journey
4 Global Back Office & Operational Efficiency / Payments Regulation Accelerating Digital Transformation – Nils Jung. November 2016. © Innopay GmbH. All rights reserved.
Topics for today
• Overview payments regulation and other key industry drivers
• Deep dive into PSD2 including strategic scenarios
• Considerations to successfully execute digital transformation
5 Global Back Office & Operational Efficiency / Payments Regulation Accelerating Digital Transformation – Nils Jung. November 2016. © Innopay GmbH. All rights reserved.
1 I Overview payments regulation and other key industry drivers
6 Global Back Office & Operational Efficiency / Payments Regulation Accelerating Digital Transformation – Nils Jung. November 2016. © Innopay GmbH. All rights reserved.
4 innovation drivers challenging financial services towards 2020…
Source: Innopay analysis
New technologies enabling cost effective, seamless digital transaction services and new business models
ENAB
LIN
G
TECH
NO
LOGY
1 Analytics Blockchain Mobile Artificial
Intelligence Cloud
computing Biometrics Robo advisor Internet of
Things API
Competitive pressure from ‘non-banks’ with customer-centric
propositions driven by technology
EMERGING FINTECH & BIGTECH 3
Regulatory reforms disrupting traditional value chain: PSD2, IFR,
GDPR, AML4, eIDAS
REFORMING EU REGULATION 4
Segment specific, personalized, contextual digital financial services:
anytime, -place, -device
SME Micro
Corporate Public sector FI
Retail
CHANGING CUSTOMER BEHAVIOR 2
7 Global Back Office & Operational Efficiency / Payments Regulation Accelerating Digital Transformation – Nils Jung. November 2016. © Innopay GmbH. All rights reserved.
…‘pushing’ service providers to re-think their Operational and Business model to safeguard future relevance
TIME
NEC
ESSI
TY F
OR
NEW
OPE
RATI
ON
AL /
BU
SIN
ESS
MO
DEL
TODAY TOMORROW
‘OPERATOINAL / BUSINESS MODEL MODEL GAP’
CURRENT STATE
Source: Innopay analysis
8 Global Back Office & Operational Efficiency / Payments Regulation Accelerating Digital Transformation – Nils Jung. November 2016. © Innopay GmbH. All rights reserved.
Market challenges impact competitive dynamics EU payments market with PSD2 as key disruptor
REFORMING EU REGULATION
• Pace of regulatory developments is increasing adding to compliance costs while enabling new strategic business opportunities to be explored
• Instant Payment leads to a new infrastructure to power digital financial services
• PSD2, GDPR (and local regulatory frameworks) will increase security, transparency, competition and innovation in financial services
FOUR MARKET CHALLENGES IMPACTING BANKING
Source: Innopay analysis
9 Global Back Office & Operational Efficiency / Payments Regulation Accelerating Digital Transformation – Nils Jung. November 2016. © Innopay GmbH. All rights reserved.
2 I Deep dive into PSD2 including strategic scenarios
10 Global Back Office & Operational Efficiency / Payments Regulation Accelerating Digital Transformation – Nils Jung. November 2016. © Innopay GmbH. All rights reserved.
ACHIEVE
HARMONISATION
PSD2 to strengthen foundation EU integrated payments market
(in national law January 2018)
PSD2 OBJECTIVES EUROPEAN COMMISSION
1 ENHANCE
COMPETITION PROTECT
CUSTOMERS ENCOURAGE
DIGITAL ECONOMY
2 3 4
11 Global Back Office & Operational Efficiency / Payments Regulation Accelerating Digital Transformation – Nils Jung. November 2016. © Innopay GmbH. All rights reserved.
Growth in e/m-commerce sparked alternative services ‘on top of’ the payment infrastructure resulting in fragmented landscape
Information
Funds
Source: Innopay analysis, Euro Banking Association (EBA)
TRUST EASE OF USE
REACH CONVERSION
12 Global Back Office & Operational Efficiency / Payments Regulation Accelerating Digital Transformation – Nils Jung. November 2016. © Innopay GmbH. All rights reserved.
PSD2 introduces various changes
Source: Innopay analysis
PSD2 CHANGE AREAS
SCOPE EXTENSION covering non-EU/EEA payment
transactions (‘one-leg’) and currencies
LICENSE EXEMPTIONS specified/restricted for limited
networks, telecom, ATM
CONSUMER PROTECTION reduced liability unauthorised
trx, fee transparency, prohibition cards surcharging, refund rights
SECURITY strong customer authentication,
requirements for initiation e-payments and data protection
Access to account (XS2A) market access regulated Third
Party Providers (TPPs): PISP and AISP
13 Global Back Office & Operational Efficiency / Payments Regulation Accelerating Digital Transformation – Nils Jung. November 2016. © Innopay GmbH. All rights reserved.
XS2A (‘API’)1
TPPs threaten to disintermediate banks as customers gain more options to interact with their payment accounts
Customers
Bank domain
PRE PSD2 XS2A ERA (POST-) PSD2 XS2A ERA
Payment account
TPP (incumbents, FinTech, BigTech)
Bank account
Internet banking and mobile app
1There seems to be industry consensus that Application Programming Interfaces (APIs) provide for a cost effective, easy and secure means of enabling XS2A. Final decision subject to EBA RTS
Bank account
Internet banking and mobile app
Customers
Bank domain
PISP AISP TP
P Source: Innopay analysis
USER IN CONTROL OF OWN DATA
14 Global Back Office & Operational Efficiency / Payments Regulation Accelerating Digital Transformation – Nils Jung. November 2016. © Innopay GmbH. All rights reserved.
PSD2 ‘access to account’ (XS2A) brief overview: new roles & services
1. Account Information Services (AIS) With user consent obtain access to bank statement
information on payment accounts
TWO NEW REGULATED SERVICES & ROLES Payment Initiation Services (PIS)
with user consent to initiate credit transfers from user’s payment accounts
Source: Innopay analysis
15 Global Back Office & Operational Efficiency / Payments Regulation Accelerating Digital Transformation – Nils Jung. November 2016. © Innopay GmbH. All rights reserved.
RTS security requirements will influence innovation in the PSD2 era
SCA required for ALL remote electronic payment transactions (Cards, SCT) above 10 EUR, no risk based approach after transitional period
1.STRONG CUSTOMER
AUTHENTICATION
1.EXEMPTIONS
1.COMMUNICATION INTERFACE
1.PAN-EU REACH
SCA exemptions are optional for AS-PSP, outside remit EBA to make decision on this
Direct access (Internet banking) versus indirect access (Dedicated API), at discretion of AS-PSP
Pan-European standardisation of interface, rather than fragmented reach
1
2
3
4
Source: Innopay analysis
16 Global Back Office & Operational Efficiency / Payments Regulation Accelerating Digital Transformation – Nils Jung. November 2016. © Innopay GmbH. All rights reserved.
PSD2 ‘access to account’ (XS2A) is only the beginning; value of ‘opening-up’ is determined by functional scope & reach
Three key messages to remember
Account information services will prove to be the greatest source of innovation
RTS security requirements will shape the user experience of innovative XS2A applications
1
2
3
Source: Innopay analysis
17 Global Back Office & Operational Efficiency / Payments Regulation Accelerating Digital Transformation – Nils Jung. November 2016. © Innopay GmbH. All rights reserved.
3 I Considerations to successfully execute digital transformation
18 Global Back Office & Operational Efficiency / Payments Regulation Accelerating Digital Transformation – Nils Jung. November 2016. © Innopay GmbH. All rights reserved.
• PSD2 is compliance exercise
• Cost driver (compliance/IT/ Ops), not revenue driver
• Tactical response to fend off new competition
THREAT
Three perspectives on PSD2 by European banks
• PSD2 value creation uncertain
• Unclear vision how to better serve customers
• Response is to comply first, and wait and see what happens
STUCK-IN-THE-MIDDLE
• PSD2 catalyst for Open Banking
• Embrace new partnerships and (data driven) business models
• Response is to create innovative products/services
OPPORTUNITY
Source: Innopay analysis
1 2 3
19 Global Back Office & Operational Efficiency / Payments Regulation Accelerating Digital Transformation – Nils Jung. November 2016. © Innopay GmbH. All rights reserved.
PSD2 will trigger different behaviors of payment stakeholders on demand side
CUSTOMER
CUSTOMER Seamless payments
across EU and control over financial assets/
data
MERCHANT Simple check-out, max.
conversion and personalized services at
point of relevance
Source: Innopay analysis
+ Choice & control - Trust in TPP (privacy), ease of use vs. ‘SCA’
+ Collection options, cost reduction - Reach, Conversion, no ‘Risk-based approach’
+ - Opportunity Challenge
20 Global Back Office & Operational Efficiency / Payments Regulation Accelerating Digital Transformation – Nils Jung. November 2016. © Innopay GmbH. All rights reserved.
PSD2 will trigger different behaviors of payment stakeholders on supply side
CUSTOMER
Source: Innopay analysis
AS-PSP PSD2 compliance with minimal impact and
new revenue streams
+ Open Banking, monetise assets - Security, liability/ disputes, profitability
BANK / PSP Maintain market share, merchant relation and
capitalise on XS2A
+ Reach, PIS, new pymt method (eMandate/ SDD), AIS/reporting - Competition, price pressure
REGULATOR Stability and efficiency through diversity and
competition
+ - Opportunity Challenge
21 Global Back Office & Operational Efficiency / Payments Regulation Accelerating Digital Transformation – Nils Jung. November 2016. © Innopay GmbH. All rights reserved.
Internal External Source of added value
2. Become / Act as a TPP
3. Expand 4. Transform
1. Comply
XS2A
func
tiona
l sc
ope
(PIS
/AIS
) Ad
ditio
nal
func
tiona
lity
Scop
e of
ope
ning
-up
Source: Innopay analysis
Not per se, but banks are at a fundamental strategic cross-road: four generic XS2A strategic options to consider
BUSINESS STRATEGIES
“Offer additional value to customers by incorporating XS2A functionality from other
banks”
“Enable customers to use XS2A functionality by opening-up to TPPs”
“Put customer in control by leveraging and extending XS2A platform”
“Offer customers the best services including (non-)bank functionality and allow
others to build from there”
22 Global Back Office & Operational Efficiency / Payments Regulation Accelerating Digital Transformation – Nils Jung. November 2016. © Innopay GmbH. All rights reserved.
Internal External Source of added value
2. Become / Act as a TPP
3. Expand 4. Transform
1. Comply
XS2A
func
tiona
l sc
ope
(PIS
/AIS
) Ad
ditio
nal
func
tiona
lity
Scop
e of
ope
ning
-up
Source: Innopay analysis
OneUse case: ‘JIT Finance - one-off AIS to assess consumer loan eligibility
BUSINESS STRATEGIES
“Offer additional value to customers by incorporating XS2A functionality from other
banks”
“Enable customers to use XS2A functionality by opening-up to TPPs”
“Put customer in control by leveraging and extending XS2A platform”
“Offer customers the best services including (non-)bank functionality and allow
others to build from there”
B. ‘JIT Finance’: One-off AIS
23 Global Back Office & Operational Efficiency / Payments Regulation Accelerating Digital Transformation – Nils Jung. November 2016. © Innopay GmbH. All rights reserved.
Licensed AISP allowed to access customer’s payment account with explicit consent to provide ‘Account Information Services (AIS)’
MODEL ACCOUNT INFORMATION SERVICE PROVIDER (AISP) • Customer instructs AISP to aggregate
information (1) • AISP sends request to multiple AS-PSPs (2) • AISP presents aggregated view on
transactions and balances (2)
AISP
EXAMPLE SERVICE PROVIDERS
EXIS
TIN
G
POTE
NTI
AL
Source: Innopay analysis
24 Global Back Office & Operational Efficiency / Payments Regulation Accelerating Digital Transformation – Nils Jung. November 2016. © Innopay GmbH. All rights reserved. Source: Innopay analysis
© Innopay 2016
• User selects preferred loan criteria • User selects preferred loan
acceptance process (Digital: iDIN + ‘XS2A’)
25 Global Back Office & Operational Efficiency / Payments Regulation Accelerating Digital Transformation – Nils Jung. November 2016. © Innopay GmbH. All rights reserved. Source: Innopay analysis
© Innopay 2016
• User selects own bank
26 Global Back Office & Operational Efficiency / Payments Regulation Accelerating Digital Transformation – Nils Jung. November 2016. © Innopay GmbH. All rights reserved. Source: Innopay analysis
© Innopay 2016
• User sees confirmation of request for account information service to assess eligibility for loan
27 Global Back Office & Operational Efficiency / Payments Regulation Accelerating Digital Transformation – Nils Jung. November 2016. © Innopay GmbH. All rights reserved. Source: Innopay analysis
© Innopay 2016
• User sees confirmation of loan request
28 Global Back Office & Operational Efficiency / Payments Regulation Accelerating Digital Transformation – Nils Jung. November 2016. © Innopay GmbH. All rights reserved. Source: Innopay analysis
© Innopay 2016
• User receives funds instantly (5 sec) when Instant Payments is live
29 Global Back Office & Operational Efficiency / Payments Regulation Accelerating Digital Transformation – Nils Jung. November 2016. © Innopay GmbH. All rights reserved.
Account information value stack is very promising from innovation perspective
Personal Finance
Management
‘Best offer’ selection
Credit scoring & loans
Purchase offerings &
loyalty
(micro) Savings &
Investments Attributes &
Privacy as currency
Source: Innopay analysis
ACCOUNT INFORMATION VALUE STACK
30 Global Back Office & Operational Efficiency / Payments Regulation Accelerating Digital Transformation – Nils Jung. November 2016. © Innopay GmbH. All rights reserved.
Quick Breakout: Basic concept of of an API
30
APPLICATION PROGRAMMING INTERFACE (API)
• API enables communication between software application where one application calls upon the software functionality of another
• It is a software architectural approach that revolves around the view on digital interfaces that ‘APIs provide self-service, one-to-many, reusable interfaces’
• Open APIs enable secure and controlled access to data or functionality by third parties
• APIs enable secure, controlled and cost-effective access to data and/or functionality, potentially by third parties.
EXPLANATION
API
SOFTWARE APPLICATION
SOFTWARE APPLICATION
Response
Request
User in control
Source: European Banking Association & Innopay
DRAFT Support Material October 2016
Data Transmission Data Exchange Data Access API Design
Key technical concepts As a result of this evolutionary standardisation nowadays API technical standards typically consist of:
31 Global Back Office & Operational Efficiency / Payments Regulation Accelerating Digital Transformation – Nils Jung. November 2016. © Innopay GmbH. All rights reserved.
Moving from PSD2 to Open Banking
API
Interface that should be scalable, reusable and secure while offering ease of use for developers through self-service
Open API
API for developers outside of one’s organization, incl. standard agreements beyond technology
Open Banking
Evolution of banking, leading to more transparency, customer choice and customer control over personal data
PSD2
Mandatory, user consent- based access for TPP to payment accounts
FOLLOWING DEFINITIONS SURROUNDING APIs
Source: Innopay analysis, European Banking Association
• Technology-driven evolution of banking referring to three developments:
1. Standardisation how banks share data;
2. Increased choice for customers 3. Secure and resilient use of client
data in third party applications with client consent
• ‘Bridges two worlds’: - Allows customers to use banking
services in context of other (FinTech) services (and vice versa)
- Combines innovative functionalities from banks and non-banks with reach through infrastructure
32 PSD2 - accelerating innovation beyond compliance. August 2016. © Innopay GmbH. All rights reserved.
Business essence of APIs lies in 1. fast and cost effective unbundling, 2. accelerated innovation and 3. continuous learning and innovation
UNBUNDLING OF PRODUCTS • Decompose products into raw data and/or functionality, reduce focus on own application and
presentation layer • Components offered as stand-alone ‘products’ via APIs • Products tailored to developer market in standardised fashion
ACCELERATED DEVELOPER COMMUNITY INNOVATION • (Controlled) access to products by 3rd party developers • Integration of products in any 3rd party application/channel allowing reach to different
customer segments • API reach determined by ‘level of openness’, stimulating innovation beyond bank’s borders
CONTINOUS LEARNING AND INNOVATION • Continuously improve APIs to build applications ‘on top of’ data and/or functionality • Allows for ecosystem of 3rd party services to further grow • Cultivation of business partnerships
1
2
3
33 Global Back Office & Operational Efficiency / Payments Regulation Accelerating Digital Transformation – Nils Jung. November 2016. © Innopay GmbH. All rights reserved.
Three future state ‘API’ standardisation options
Bank driven
Banks leading set-up API standardisation initiative • Configuration options: Pan-EU,
multiple coalitions, individual bank
Bank + Service
provider driven
Banks collaborate with relevant service providers (FinTech/PISPs/AISPs) to drive API standardisation initiative • Configuration options: Pan-EU,
multiple coalitions, individual bank
Regulator driven
Regulator (EC/EBA/ECB/ERBP) takes lead to shape API standardisation • ‘Push’ technical solution upon banks • Response to industry actors not
getting organised; fragmentation risk
EBA CALLS UPON INDUSTRY COLLABORATION FOR PAN-EU REACH
TPP A
AS-PSP Community 1
AS-PSP Community 2
TPP B TPP C TPP D
AS-PSP X AS-PSP Y
Fragmentation (N:N) 6k interfaces, 6k end-points
Pan-EU reach 1 interface,
6k end-points
THREE FUTURE STATE API STANDARDISATION OPTIONS
1
2
3
OPT
ION
PRE
FERE
NCE
-
+
API
RTS
Source: Innopay analysis
34 Global Back Office & Operational Efficiency / Payments Regulation Accelerating Digital Transformation – Nils Jung. November 2016. © Innopay GmbH. All rights reserved.
We have developed a proven, modular approach to PSD2 strategic planning covering essential board level topics
Source: Innopay experience
top related