Regulation — yes, regulation — appears to pushing European banks to innovation, but perhaps not in ways anticipated by regulators.
Lloyds Banking Group is considering an account aggregation service that would allow its consumers to pull in data from other financial institutions.
While the plans appear to be at the theoretical stage, or perhaps on a long-term roadmap at best, they are startling. A 100+ year old bank willfully allowing its customers to intermingle its data with other FIs’ has been nothing short of a nonstarter to date.
A Lloyds executive talked about the possibility of being the aggregator of financial services data during a discussion at a Bank Innovation event recently. The executive, Alon Zadka, senior innovation lead, said the possible product could come after Lloyd’s finishes rebuilding its “account journey” processes, meaning the process of how a customer takes a bank account and the bank subsequently services that account.
Why might Lloyds take such a remarkable step forward? PSD2.
For those of you who don’t know, PSD2 will soon force European banks to make available their application programming interfaces, know as APIs, to developers. The idea is that that APIs will give startups greater access to banking services and break the banks’ data hegemony.
But it appears to already be leading banks — even the old, stodgy ones — to start thinking like startups. The thinking goes, if other banks are making their APIs available, why not use them?
As far as I can tell, this was not the intent of PSD2, which was expected to be a benefit for startups. But the regulation might end up consolidating the use of bank data and services among banks, not startups. The banks, after all, has ready cash available for investment. Startups, not so much.
Of course, this is years out. PSD2 does not become law until January 2018. Who knows how things will play out once it goes live. The official line from banks is that PSD2 is something of a travesty: a bank is essentially handing over the keys to their product and franchise kingdom, even when it might have taken that bank 100+ years to make those keys, as can be argued is the case with Lloyds.
But I suspect that it will blow open the doors to development way beyond the expectations of the European Union pencil pushers who drafter the rule. Will all of those developments be positive? Likely not. But they seem as though they’ll be interesting. For all of financial services.Like This Post