Financial institutions in Europe are preparing to confront a major legislation revision for the banking industry: the proposal for a revised directive on payment services in the internal market, better known as Payment Services Directive, or PSD2. PSD2 represents one of the single biggest changes in banking industry history, because it’s the first time banks will be obligated by law to open their infrastructures to third parties. Many banks are concerned about this legislation, feeling exposed and under attack from new entrants. It also enables customers to be in the driving seat when it comes to their finances. Yet, does it need to be a huge threat? In this special, exclusive webinar, Jouk Pleiter and Jelmer de Jong of Backbase talk about what PSD2 means for the banking industry, and how can banks can prepare for this inevitable change. We are looking at: What PSD2 actually is PSD2 and the connection with APIs PSD2’s impact on banks New entrants in the banking space The bank’s fundamental strategic choice: the defensive or offensive strategy Opportunities to capitalise on.

1. PSD2: Making it actionable
Webinar Wednesday July 27th, 2016

2. Overview
What is PSD2
2

3. What is PSD2?
PSD2 is short for ‘Second Payments Services Directive’, a new
European regulation that says banks have to allow a secure
way for customers to authorize a third party provider to have
direct access to:
§ Account and transactional data
§ Make and authorize payments
What is PSD2?
3

4. What is PSD2?
PSD2 will impact how we access our finances
4
Labor intensive task of getting
complete overview of financial
status across banks.
Before PSD2

5. What is PSD2?
PSD2 will impact how we access our finances
5
‘Account Information Service
Providers’ (AISPs) can offer
direct insight in all products and
transactions across banks.
After PSD2 adoption

6. What is PSD2?
PSD2 will impact the flow of payments
6
Consumer
Issuing bank Card Scheme Acquirer
Merchant
Before PSD2

7. What is PSD2?
PSD2 will impact the flow of payments
7
Consumer
Issuing bank
Merchant
After PSD2 adoption
Parties can act as ‘Payment
Initiation Service Provider’
(PISP) or work with a PISP to
simply the flow of transactions
and payments.

8. Overview
Impact of PSD2 on banks
“.”8

9. Impact of PSD2 on banks
PSD2 Timeline: Aiming for Q4 2018
9
December 2015
EBA released discussion
paper on authentication
and secure communication
June – Sept 2016 (est.)
Consultation period on draft
RTS*.
January 2016
PSD2 is published in the
official journal of the
European Union
January 2017
Deadline for EBA to submit
RTS on authentication
April 2017 (estimate)
EBA RTS adopted by
commission
October 2018
Deadline for EBA RTS
Compliance for ASPS, PSPs
and Authorities
January 2018
Deadline for member states of
the EU to transpose PSD2 as
law across 28 member states.
2015 2016 2017 2018
Banks have 18 months to
comply to RTS
* RTS = Regulatory
Technical Standards.

10. Impact of PSD2 on banks
1. EU sets regulation and defines technical standard
2. EU member states to turn this into national laws
3. Banks to comply before October 2018 (estimate)
1. Third party authentication
2. Third party access to Payments (transaction requests)
3. Third party access to Account information(balances and
transaction history)
4. Fees Transparency
5. Fine grained entitlements
So, what needs to happen?
10

11. Impact of PSD2 on banks
PSD2 will change to competitive landscape
11

12. Impact of PSD2 on banks
Strategy: Proactive vs Reactive
12
§ There is a choice: do you implement the minimum requirements to fulfil
PSD2 (reactive) OR do you embrace the change and modify your
business model (proactive)?
§ PSD2 is significant market disrupter and early adopters will shape the
market
Proactive / Disruptor Bank
§ First top adopt open APIs
§ First to welcome 3rd party
developers / ecosystem
§ Accept commoditizationand find
new differentiators
Reactive / Disrupted Bank
§ Meet the essential criteria
§ Rest is business as usual
§ Have defensive and delay
strategy to 3rd party's

13. Impact of PSD2 on banks
Proactive banks: move to public API’s
13
API

14. Overview
Banking API Economy
14

15. Banking API Economy
Back Office Functions
PRODUCTS
& IT SYSTEMS
Future = Two Speed Architecture
Existing Systems
(Silos)
Customer
Experience
Agility
Flexible Customer Journeys
API

16. Banking API Economy
Future = Two Speed Architecture
16
Backend
Digital Customer Experience Platform
SOA / Middleware layer
System of
Record
YearsMonths
Employee
Applications
Partner
Apps
Customer
Apps
"Internet of
Things"
Days
Database
API
EXPOSURE
API
CONSUMPTION

17. Banking API Economy
Opportunity: Build Connected Experiences
Next Generation
Consumer Experiences
PFM, cardlinkedoffers
Work with FinTech Vendors
P2Plending,Wallets,New
Apps, IoT, etc.
Access control, and risk
management
Reduceriskthrough
accesscontrol, metering
of enterpriseassets
Outside-in Banking
CrossBankingAggregation,
Multiplecontextualfinancial
apps Alternative models in
Wealth management
Robo-advisorsforaffluent
segments
Deposits LoansInvestments Payments
Third-party
services OtherBanks 17
API

18. Customer Controlled
Account Aggregation
&
Customer Data Hub
Banking API Economy
Opportunity: Complete Customer View
18
Banks FinTech Apps
data
data
data
data
data
data

19. Banking API Economy
Opportunity: Integrate FinTech Capabilities
19
API Layer
Connecting to 3rd
parties,
Selecting the best offer / service
Omni-Channel
Digital Banking
Platform
Core Banking

20. Banking API Economy
What is the Business Model / ROI?
20
Revenue-sharing models
(API provider pays developer)
Fee-based models
(API provider charges developer)
Freemium models
Fixed
Flexible
Hybrid
(flat fee plus fixed or flexible)
Transaction
One-time
Subscription
Duration
Quantity
Hybrid
Transaction Volume
Custom Attribute
Advance / Arrears
Pro-rated /Full amount

21. Overview
PSD2 Roadmap
21

22. PSD2 Roadmap
PSD2 Timeline: Aiming for Q4 2018
22
December 2015
EBA released discussion
paper on authentication
and secure communication
June – Sept 2016 (est.)
Consultation period on draft
RTS*.
January 2016
PSD2 is published in the
official journal of the
European Union
January 2017
Deadline for EBA to submit
RTS on authentication
April 2017 (estimate)
EBA RTS adopted by
commission
October 2018
Deadline for EBA RTS
Compliance for ASPS, PSPs
and Authorities
January 2018
Deadline for member states of
the EU to transpose PSD2 as
law across 28 member states.
2015 2016 2017 2018
Banks have 18 months to
comply to RTS
* RTS = Regulatory
Technical Standards.

23. PSD2 Roadmap
Build or Buy a solution that enables:
§ Third party Authentication (oAuth + 2FA)
§ Entitlements - Flexible and fined grained access control
§ API versioning and management
§ Fraud and penetration monitoring
§ Developer tools (SDKs, sandboxes, documentation)
§ Align on -- or select, an clearly defined API standard
PSD2 Ready – Shopping List
23

24. PSD2 Roadmap
1. You don’t have to wait for the regulations to be final. It is
going to happen, and technology selection and
implementation can already start today.
2. You don’t have to limit the scope to PSD2. Be open and
creative in what APIs and services to enable for 3rd party
developers and partners to find new business models and
mutual benefits.
3. Experiment. Get in a ‘lean startup’ approach to this, with
smart technology to see what works and sticks. Be open.
PSD2 Roadmap
24

25. Overview
The Backbase Vision
25

26. The Backbase Vision
Mission: We empower Financials to
accelerate their Digital Transformation
26

27. The Backbase Vision
Raising the Bar – Superior Experience
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Empowering the Self-Directed Customer

28. BACKBASE: Omni-Channel Banking
Existing
Systems
PSD2
enabled banks
Customer Experience & Digital Banking Services
OLB Mobile
Seamless Omni-Channel Journeys
Retail Banking
Business Banking
Wealth Management
The Backbase Vision
Digital Banking API Layer – INTEGRATE & EXPOSE
FinTech Providers
Open APIs

29. The Backbase Vision
BACKBASE: Build Connected Experiences
Open API Layer
Omni-Channel
Digital Banking
Experience
Core Banking
PSD2 Enabled Banks

30. The Backbase Vision
BACKBASE: Business Model Agility
Scenario 1
Digital CX
Digital
Banking
Core Systems
Scenario 3
Aggregator
Banking
Services
Aggregator
PSD2 enabled banks
Fintech Providers
Fintech Providers
Scenario 4
Omni-Channel
Omni-Channel
Banking
Platform
PSD2 enabled banks
Fintech Providers
Fintech Providers
Core Systems
Scenario 2
New Digital
Built-for-Digital Banking Platform
Lean
Core

31. Customer Experience Solutions. Delivered.
The Backbase Vision
31
Forrester Market Wave for
Omni-Channel Banking Solutions
Jost Hopperman
“Backbase leads the Pack”
ü Broad business capabilities,
ü Rich customer experience,
ü Very solid technology
ü Very solid architecture
Recognized as Innovation Leader

32. Q&A
32

33. Thank you!
Jouk Pleiter, CEO & Co-Founder, jouk@backbase.com
Jelmer de Jong, VP Product Management, jelmer@backbase.com