Advent of Open Banking presents myriad opportunities

Retailers have the opportunity to reap major benefits if they embrace the ‘Open Banking’ landscape that has been created with the recent introduction of the PSD2 legislation that gives them access to peoples’ financial data.

The second Payment Services Directive (PSD2) was introduced in January and brings in two key positive scenarios for retailers: to retrieve customer transaction data across channels and across all merchants; and execute payments much quicker by initiating the transaction on a simplified bank-to-bank basis.

Speaking at the Tech. conference in London, Daniel Lee, global payments strategy lead at Kingfisher, suggested that it was still early days for retailers to embrace the opportunities that PSD2 presents because there is still a focus on the compliance issues around GDPR and that data breaches have led to some sensitivity around accessing customer payment data.

He also highlights that GDPR is compliance-driven for retailers whereas PSD2 is an avenue that they can investigate on their volition. This situation has led to Lee suggesting that certain industries will invariably take the lead in this area of open banking including gambling firms.

The opportunities

He acknowledges that there are some clear benefits that look particularly attractive to Kingfisher. This could include it offering customers credit: “The opportunity to go direct to customers for payments is a huge benefit. If we can have a single view of a customer’s payments [history] then we can build a profile and take credit in-house. It’s a nice option to have if we want to offer it.”

Lee can also see the upsides to potentially offering rebates to customers who pay in a certain way because retailers will enjoy lower transaction fees from PSD2. “This means we could offer a reward to customers. We would be effectively offering loyalty [benefits] based on transaction-types. We can push them to using the payment method that we want them to use and then reward them with rebates,” he suggests.

What Lee believes will open up the opportunities for retailers from PSD2 will be the applications and technologies that are developed by third-parties and which the likes of Kingfisher can then integrate into their own operations. “That’s when solutions from retailers will come out. This is when the credit opportunity will appear,” he says.

Karyn Mukerjee, director of data innovation & partnerships at Dunnhumby, certainly recognises the opportunity that PSD2 presents, especially to those retailers that do not have a loyalty programme and who are in a category with a low frequency of shopping visits from customers.

“The idea of open banking and access to financial data is very interesting. Retailers can find out about the lives of their customers from this. The depths of this data are huge. For those without loyalty schemes they can see what [customer activity] is driving sales. Is it a small group of regular customers or a large number of infrequent customers? Retailers will be able to act on this information. It’s massively exciting,” she says.

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