Effective Implementation of PSD2 and Open Banking Propositions
The target for Open Banking access has fallen way short of legislators’ expectations, with over 40% of European banks still unable to provide adequate infrastructure and access. There is no doubt that the issue of PSD2 continues to play a major part in the European Payments landscape. The European Central Bank makes a significant demand on all financial institutions to provide a ‘sandbox’ or testing environment for Fintechs who want and need to access their data. At present, many banks are struggling to identify a suitable solution.
The nature of the challenge
In all fairness, FIs face major challenges every day in trying to ‘keep the lights on’. Now, they are also expected to create a testing sandbox for their partners and competitors so that they can exchange data. There are commercial considerations to consider, but many organisations are clearly having problems with the technological solution.
Financial Institutions are being guided to look at the Open API revolution as an opportunity, not simply a threat. Perhaps they should consider the requirement to provide testing and/or sandbox facilities in the same way. Getting the right solution in place will deliver savings for organisations in their investment and NPD budget.
The costs of new development
Capgemini’s World Quality Report highlights the scale of waste in the innovation process. The authors sought the views of 1600 executives involved in IT across the globe, and they provide a comprehensive overview of the key trends in quality assurance (QA) and IT testing. Although the executives are spread across different industries, the results mirror our experience of banks and payment companies around the world.
According to Capgemini, QA and test budgets have grown steadily every year since 2012. On average, the industry is spending 31% of its IT budgets on testing and Capgemini predict that this will rise to 40% over the next few years. They believe a reasonable level is 25%. I believe it should be lower still and certainly south of 20% for anyone testing payment technology.
Innovation in testing
Almost all institutions acknowledge that they need to modernise their test environments and many are simplifying and rationalising their infrastructure so that they can automate. There are two possible approaches to investing in a test environment to address Open API / PSD2.
One is simply to add another set of simulators. The drawback of this approach is that it is unable to add value beyond simply checking messages. The strategic solution, which aids long-term planning across the enterprise, is to invest in a test platform that can then be used to deliver the automation that financial institutions suggest they are desperate for.
Currently, many organisations are suffering from an endless ‘to do’ list and a lack of resources to get through it. In addition, there is a squeeze on development budgets and therefore rarely the time and capital to develop a new approach to testing.
However, taking the time to implement a strategic solution rather than a quick fix will deliver major savings and enable wholesale automation of testing. This can be funded by the legal requirement to provide a ‘sandbox’ so that funds are already available. This is a genuine ‘win-win’ by any measure. The question though is, will Financial Institutions actually do this or just add another sticking plaster solution to the infrastructure?