The Banking Revolution: Ricky Knox, Tandem Bank CEO, talks what to Expect

Digital challenger banks are primed to spread into mainstream consumer finance following legislative changes on 13 th January 2018. Open Banking is here.

On January 13 th 2018 the revised Payment Services Directive (PSD2) will be implemented as national law. The directive puts forward a slew of opportunities and challenges for financial service providers, be they newcomers in the space or seasoned veterans.

All banks across the EU will soon be required to provide other companies with access to customer data (with their consent, of course). This is a fundamental shift in personal finance: Traditional banks will no longer be able to complacently offer a one-stop- shop of financial services and products.

Consumers and small businesses will now be able to share financial data with third parties offering competitive services. Rather than being stuck managing your money on the outdated banking app your current bank offers, you can place all your accounts and information into a slicker tool that was built with you in mind.

For many people the idea of their data being shared could be concerning. Don’t panic. This directive also includes a number of new security precautions. This legislation goes a long way to de-monopolise user data, but this shouldn’t come at the cost of safety. The introduction of stronger identity checks for online payments will help keep accounts protected.

The prohibition of non-transparent pricing methods for international payments is another big step in the right direction. For years banks have been disguising fees behind exchange rates and jargon. New challengers have already taken steps to reduce hidden costs, but it is now obligatory to clearly communicate all pricing methods to customers.

The good news is that it’s easier than ever before to switch accounts, which is a big part of open banking. Although traditional banks are burdened with legacy tech and infrastructure, digital challengers are able to create efficient application systems from scratch. Typically a digital account can be applied for in under 10 minutes, with banks like Tandem offering streamlined approaches.

Aside from any of the changes that individual articles of the directive will bring about, awareness is the most important thing open banking potentially has to offer. Many customers are disillusioned with their finances and don’t view it as an area of their life where they have much agency.

With PSD2 we hope customers will start to realise that they do have choices when it comes to how they save, invest, and budget their money. The practical changes may offer new challengers and fintechs a chance to develop their offerings, but it will be the long term change in attitudes that will allow them to build trust in the banking space, and ultimately shape it in their own image.

So what does this mean for the future of personal finance? It’s putting control into the hands of the customer like never before. People can now choose how to use their financial data. They can choose to change banks. And, most importantly, they can make these decisions with access to all the relevant information and security needed to get them the best possible outcome. The revolution is here.