With the introduction of new regulations concerning data access, particularly the Second Payment Service Directive (PSD2) and the General Data Protection Regulation (GDPR), digital businesses must gear up. It is important to prepare not only for the risks, but also for the opportunities that will arise from these new regulations. In fact, this could be a time for many businesses to transform their data management for the better. The key question is how companies should position themselves when adapting their business models in compliance with GDPR and PSD2. This is an important question, especially for those acting in a rapidly developing digital environment like the FinTech sector.
Let’s start with PSD2, which has already entered into force this year (13 January). PSD2 aims to create an effective and secure single European market for payments. The idea is that cross-border payments should be simple and that the payment market should be open in order to create better competition. Open banking services, in which third-party providers (TPP) are granted access to bank data, comprise a key element. This will consequently require banks to open up their customer data to TPPs.
As a result of GDPR, which also entered into force this year (25 May), stronger data protection rules will be introduced. These rules apply to all operating companies within the EU. Thus, companies that collect, store and use personal data must comply with GDPR. This means in particular that companies will need to ensure that their customers have more control over their personal data. This includes the rights of individuals to be informed and to obtain information about how data are stored, forgotten, data portability etc.
In a nutshell, preparing for these regulations can easily be considered a burden. However, this can also be a turning point for many companies to open their eyes to the opportunities that will arise. What are the overall benefits? Above all, these reforms (PSD2 and GDPR) will harmonize data protection and payment services. This means that the same set of rules applies to all companies in the EU. Companies can benefit from an even and clear playing field, which will make it easier for companies to contribute to developing customs in the market. Another advantage is that there will be a modernized regulatory framework that is correlated with the current digital data business environment.
So, if we now return to the initial question: how should companies position themselves in order to benefit from the new regulations? It can be said that the future lies with the modern digital customer. In a sector like FinTech, it is important to always have future-oriented and innovative prospects, and that’s where the modern customer comes in handy. It is essential to know that these regulatory reforms are beneficial for customers. Therefore, it should be in the company’s interest to comply with the new regulations. In this modern era, customers have (or certainly will have) higher demands about how their data are handled. Therefore, companies that have positioned themselves through a consumer-focused strategy, not only in the marketing and sales interface, but also from a regulatory viewpoint, will be at the forefront of the market.
Companies that position themselves in a modernized, compliant and futuristic way will be the winners. Empowering and putting the modern and future customers’ needs at the heart of the company is an important part of being innovative. The expectations of today’s customers will very likely have an effect on future regulations when it comes to data protection and payment services. Thus, unlike traditional companies, innovative companies can more easily take advantage of the benefits of the new regulations. For instance, companies that are currently at the forefront with online services and mobile apps, which customers expect these days, will benefit a great deal from banks opening up to TTP due to PSD2 (e.g. PayPal etc.). Yet traditional companies like banks can also eventually benefit if they take the right approach as the regulations are being implemented.
In conclusion, companies need to step up and empower modern customers within the framework of the new digital data regulatory era. Companies that are proactive and on the frontier of the transformation of their digital business model will not only succeed by becoming more innovative, but also by becoming more efficient – and most importantly, in a customer-focused and sustainable way.