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Banking disrupted: It was about time :)


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“Banking is necessary, Banks are not.” Bill Gates

PSD2 regulation is an update to notice in our reality. The lawmaker of PSD and its update, PSD2, envision a decentralized banking system, where banking institutions would not be the star, necessarily. The regulators clearly state that PSD2 scope involves opening up payment markets to new entrants within the spectrum of a more efficient market, with more players offering greater choices and better prices to consumers.

The proud offering of PSD2 involves two sub-quotations, that of Account Information Service Provider (AISP) and that of Payment Initiation Service Provider (PISP). PISP offers payment simplification and enhances transaction security, when AISP introduces a very interesting context where companies, other than banking institutions, could be based on information derived from your bank account in order to offer you solutions and convenience concerning your financial activities. But what is the value of these initiatives for consumers?

The value of fintech investments worldwide amounted to, approximately, $10bn in 2014. VC-backed global fintech deals & financing amounted to $16.5bn in 2017 and within the first quarter of 2018, fintech companies raised over $5bn in funding by VCs. Fintech industry is booming and financial institutions are starting to adapt. According to research performed by PWC, 82% of financial institutions expect to increase fintech partnerships within the next 3–5 years and 77% of them will increase internal efforts to innovate.

With Revolut we can perform international money transfers, open GBP or EUR accounts within 3 minutes and withdraw money from ATMs globally, all for free. With Lending Club or Upstart, peer to peer lending, that is to say debt financing without the financial institutions, is a new reality. Trading & investing space is disrupted by robo advisors and other startups that make sophisticated and effective investing algorithms available to every you and me. Payment solution startups, well we all know Paypal, envision a cashless economy, where our wallets will be fully digitized and available on the touch screen of out smartphones. Personal finance, budgeting, savings, taxes, wealth management, cryptocurrencies, foreign currency exchanges, the capital markets, insurance and crowdfunding are only a few of the fields available for exploitation to fintech.

Increased digitalization, social media, AI, machine learning on the one hand and on the other hand banking as we know it, fintech companies and regulators who try to leverage decentralized economy within the spectrum of efficient market hypothesis. The financial landscape is evolving. New markets, new players, updated regulations and most importantly new products & comprehensive solutions.

It is fascinating to watch these different forces shape progressively the future landscape of banking. What is more interesting is that all these efforts have our consumer interest at heart and work towards our convenience, profit, safety and greater financial inclusion. It is clear to me that financial institutions are well aware of the changes that are coming their way and that it is to their best interest to react as soon as possible in order to lead innovation within their market and enjoy the benefits of the pioneers.