Results from KuppingerCole Study: The Future of Banking - Innovation & Disruption in light of the revised European Payment Services Directive (PSD2)

Wiesbaden, March 02, 2017 – Today KuppingerCole Ltd., an international and independent analyst company with a strong focus on Information Security, Identity and Access Management as well as all areas concerning the Digital Transformation published the outcomes of their latest study about the Future of Banking. During the Digital Finance World event at the HOLM in Frankfurt a. M., Founder and Principal Analyst Martin Kuppinger and Lead Analyst John Tolbert from KuppingerCole presented the results at the first event session of the day. The study was realized by KuppingerCole in cooperation with PwC Everett.

In early 2017 KuppingerCole performed the survey amongst the industries affected by PSD2, such as banks and FinTechs. The primary focus of the survey was on Strong Customer Authentication, API Strategy and KYC & Customer Identity Management, in the context of the changing requirements imposed by PSD2. The results shed light on the lack of preparation and maturity of banks and other institutions, for the anticipated changes imposed by PSD2.

Risk-based and Adaptive Authentication are gaining ground slowly

When looking at the answers on both the state of Adaptive Authentication versus Multi-Factor Authentication and Risk-Based Authentication as well as the authentication technologies in use or planned, KuppingerCole observed a lack of supporting the customers demand convenience. While close to 90% of the organizations already support MFA or plan for it, only 13.6% already have Adaptive Authentication support in place. While that number will continue to grow, with concrete rollouts and planning add up to another approximately 30%, there are still many organizations showing a gap in that field.

Customers want to use the device of their choice and an authentication process they are familiar with, for example, built-in biometrics, or an approach which is convenient to them. The lack of support for Adaptive Authentication and biometrics stands in stark contrast to this expectation. Many of the organizations affected by PSD2 have not yet found a solution which supports both the evolving requirements of PSD2 and the need to provide convenient customer authentication.

When looking at the API capabilities supported today, we get a very mixed result. Access to customer data is most common, while payment and bank account related APIs are rather rare. We observed a strong need for financial institutions to rethink and redefine their API Management and Security strategies, as well as their approach for providing APIs in the context of PSD2.

Furthermore, KuppingerCole observed a lack of modern approaches towards supporting KYC requirements and initial customer identification. This indicates that many financial institutions are still immature when it comes to balancing regulatory compliance with customer convenience. There is a growing number of more convenient approaches available but adoption rate still is very low.

Traditional financial institutions are more likely to fail to balance regulatory compliance with customer convenience. This puts them at risk of losing ground in their competition with the dynamic FinTech companies.

The new Future of Banking (PSD2) Study is now available at the KuppingerCole Research areaParticipants of the Digital Finance World 2017 as well as registered members of press receive the study free of charge.

Journalists are kindly asked to send specimen copies of any published articles or links to online publications referring to this study.

Digital Finance World 2017

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Digital Finance World 2017

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