Adaptability is key to thriving in the financial services industry. Industry disruptions, technological innovations, new competition, and changing standards of compliance all demand a certain degree of flexibility. Fortunately, compliance is the one area where financial institutions can plan ahead. PSD2 and GDPR will both present new challenges for regulatory compliance. But with proper strategy and the right enterprise cloud, FIs can meet those challenges with confidence.
The Second Payment Services Directive (or PSD2) will require payment service providers in European Union member states to make several changes to how they currently do business. The aims of PSD2 are to increase competition, secure customer data, and promote better interoperability throughout the EU. The agreement — which will be in full effect as of January 13, 2018 — also includes Norway, Iceland, and Liechtenstein, who are not members of the EU.
However, PSD2’s changes will be even more wide-reaching than that. It could potentially trigger global changes to the payments industry. Banks in other regions without such regulations like PSD2 — in the U.S. for example — will need to see the commercial benefits coming out of Europe before they’re willing to invest in similar compliance.
Globally based banks with customers in the EU will still have to invest in compliance changes in order to do business with lucrative European clients. Given they’ll have to invest in the more rigorous compliance regulations, it’s likely they’ll set those standards across their organizations. This could start a ripple effect, as more global financial institutions are incentivized to institute the changes so they can do business with (and compete with) their European counterparts.
Once banks shift, they tend to stay the course. For example, though the future of the Consumer Financial Protection Bureau is uncertain and the Financial CHOICE Act could affect aspects of Dodd–Frank, most organizations already enacted and invested in the mandatory changes following the Great Recession and likely won’t remove them now.
The General Data Protection Regulation (GDPR) will set new standards and change how financial institutions handle customer data. It also changes what is traditionally thought of as customer data. For instance, protecting private names, addresses, and Social Security numbers has been standard fare for financial institutions for some time now. The GDPR, which takes effect in May 2018, will require the same level of rigor for electronic information such as cookie data, biometric data, and IP addresses.
Customers who want to consent to have their data shared with third parties under the GDPR will expect that data to be safe, and fintechs will want to make that data easy to access, which will mean API standardization. The Euro Retail Payments Board is working to get the industry to agree on a set of standards, much like how Payments UK influenced ISO 20022.
These massive shifts are where data, security, and the cloud intersect.
Navigating those shifts and maintaining compliance involves storing, monitoring, and reporting very large amounts of sensitive data. Remaining compliant requires financial institutions to implement new security and data solutions, which can potentially entail spiraling upward costs.
SAP, Cloudera, and Intel offer a solution architecture for compliance that combines each company’s technologies. SAP HANA Vora offers valuable insight to both structured and unstructured data, and Cloudera Enterprise allows banks to ingest and store data faster than they had previously, providing the necessary security for compliance with PSD2 and GDPR. A robust cloud solution can handle large sets of heterogeneous trade data, store it in a manner that can be easily and securely audited, and still allow for real-time transactions with a latency no greater than five seconds.
This solution offers the performance, scalability, and agility to allow financial institutions to meet PSD2 and GDPR with confidence and to assure regulators and customers alike that data is managed both securely and efficiently.
Explore more secure, reliable solutions for banking and fintech with Intel Financial Services.