One of the highlights of our 2017 was seeing the emergence of the first Digital Identity Service Provider, run by Rabobank. The solution provides businesses with a simple way to identify its customers online, and lets those customers apply for services 100% digitally.

This signifies more than just another bank product launch, it’s the first real-world example of what the industry has been espousing for some time. That banks cannot do everything in house and that partnering with fintech firms to deliver solutions makes financial and strategic sense.

It marks a maturation point in the market, where some of the more vocal FinTech companies’ rhetoric of disintermediation has softened into industry-wide words of partnership and mutual benefit.

This has huge potential to spur the development of truly innovative technology and solutions, more flexible pricing models and, thanks to cloud technology, removes the need for legacy system integration.

When we look back, 2017 may well be remembered as a watershed in the development of financial services .

 2018 and the hidden side of PSD2 

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Clearly PSD2 will be one of the major themes of 2018, as it has been in 2017, but while most are focused on the opportunities for new entrants and the threats to incumbents, there has been something of a collective blind spot around strong customer authentication (SCA).

Although the requirements come into force toward the end of 2018 they have the potential to undo all the work currently being done to create a smooth, hassle-free customer experience for any company transacting online.

By mandating two-factor authentication for any transaction over €30, the regulation seriously affects marketplace companies such as Amazon, gig-economy companies like Uber and small independent ecommerce players.

A failure to successfully incorporate SCA into the customer journey will have huge impact on customer satisfaction, transaction volumes and in extreme cases, profitability.

PSD2 to redefine the banking relationship in 2018

PSD2 forces banks to open up and provide access for third parties. With screen scraping set to be outlawed, APIs seem to be the only way to make this a workable reality.

Clearly this fills many banks with trepidation and the likelihood is that these APIs will offer third parties the bare minimum of information.

These APIs present banks with an opportunity, however. If banks were to connect to each other through them, the banks could become a one-stop shop for their customers.

They’d be able to have a complete customer view across multiple providers, act as the single portal through which consumers manage their financial lives and, thanks to that improved customer view, be able to tailor services for the individual at a far more granular level than is currently possible.

2018 will see the start of movement towards this model by banks streamlining and rationalising authentication platforms so that they are able to authenticate customers to a specific level.

It’s only through being able to establish a customer’s identity between banks and other third parties that this strategy will work.

Ole Christian Olsson is VP Sales and Marketing at Signicat