||After the introduction of the European Union (EU) regulation on the Payment Service Directive (PSD2) that came into force in 2019, the banking industry in the EU has seen steady changes toward opening the financial industry, especially banking infrastructure. The Baltics has a mature banking industry with the largest bank in the region – Swedbank. Swedbank, as do other commercial banks, has been compliant with regulations and created means of Application Programming Interfaces (APIs) for data owners to share data with other parties – Third Party providers (TPP). The regulation allows owners of data (privates and corporates) to initiate payments directly from an account in the bank from the TPP service provider and by giving consent send statement information to Third-party providers via APIs.
The purpose of the thesis is to analyze what impact regulation has created on the Swedbank business in home markets in the Baltic. To define strategy on how Swedbank should use opportunities of PSD2 and Open Banking, and how that impacts Swedbank’s current business. To understand whether Swedbank should use internal resources to compete with the market that adopts innovative services and captures customer relationships by relaying and using the bank’s infrastructure.
As regulation has asymmetric obligations toward banks and forces banks to for free open up infrastructure for TPPs, that has created a situation where Swedbank must maintain infrastructure costs and customer due diligence even when services are provided by TPPs to customers. As Swedbank holds the same license level as TPPs, the bank can choose whether to be only compliant with mandatory PSD2 framework and APIs or be proactive and distribute and aggregate data beyond the mandatory scope and crate chargeable services via Premium APIs. The author proposes a problem for Swedbank: ‘’How do compete in the new regulatory Open Banking framework, where TPPs provide more attractive services to customers for less cost and higher margins?’’
To understand the problem, the author looked at external and internal factors that impact Swedbank’s business. To analyze the banking industry, the author looks at the global economic trends and general macro environment of the largest economies in the world like the US, China, and the EU. The author will describe key economic indicators in the world and then use the Politic, Economic, Social, Technological, Environmental, and Legal (PESTEL) framework to analyze the macro-environment of the Baltic and EU banking industry. To understand the regulatory framework the author looked at key principles of how PSD2 and Open banking regulate different financial service providers and the requirements of the financial service providers. The author used SWOT analyses and Porter's five forces to understand Swedbank’s competitiveness, strengths, and weakness. For assessing the strategy’s, current positioning the author used Swedbank’s internal data and publicly available data from Baltic web pages and looked at current Swedbank’s positioning and offering in the Open Banking area.
To seek the best solutions the author looked at three possible strategies and analyzed their pros and cons if Swedbank would implement them. The author looked at the following strategies for Swedbank: 1) Focus only on current core business protection and do not invest resources competing in the Open Banking framework with TPPs; 2) Actively compete with third-party financial providers such as TPPs and Fintech, to gain market share by creating Premium APIs; 3) Swedbank, where it is value corporate and does partnerships with TPPs and FinTech’s, shares data wherever the customer uses data and is present in value creation outside Swedbank channels.