New rules designed to stoke competition in the European banking sector by giving consumers greater control over their data take effect next year, but most banks aren't ready for the new landscape, according to survey results published Monday by PricewaterhouseCoopers (PwC).
New rules take effect in Europe in January 2018 that, among other things, are designed to usher in the era of so-called "open banking" — which would enable customers to share their data with third-party firms. The idea is that expanding access to client data will help empower fintechs and intensify competition for the traditional banks.
"[The new rules are] a testament to the newly unfolding world of open banking where fintech companies, merchants and even telcos can change the payments landscape completely," PwC says. "In January 2018, banks' monopoly over customer account information and payment services will effectively cease."
The PwC survey finds that "few banks seem to be ready" for the new environment. It reports that interviews with 39 senior bank executives in 18 countries found that two-thirds expect the new rules "will affect all their bank functions", but that only 9% are ready to implement changes to accommodate the new rules.
"For many banks, compliance will be a challenge by 2018, but mere compliance — though challenging in itself — will not be their only concern. Banks need a proper strategic response to avoid becoming disintermediated by more customer-oriented third-party offerings. They will need to analyse the emerging payments landscape and identify new revenue opportunities for services, something most have yet to do," says Marco Folcia, partner at PwC, in a statement.
Banks should ensure their top management is part of the strategic response to open banking, says PwC, rather than a by-product of a compliance project managed by IT and operations. "Given the far-reaching impact [the new rules] will have, banks that take this approach will miss the opportunity to become powerful operators in the new world of open banking," it says.
In Canada, the Department of Finance Canada's latest consultation paper on possible reforms to financial sector legislation indicates that Canadian policymakers intend to explore the idea of open banking here, too.