With PSD2, banking and advertising are colliding. Don’t get squished in the middle.

bannkOver the last thirty years we have changed how we spend money, from buying our clothes, food, and gadgets from malls, markets, and the high street to buying most of our goods online. E-commerce is eating everything. And that doesn’t just mean shopping for juicers on Amazon instead of John Lewis – shopping tills and cashpoints in the physical world are moving to the cloud too. Soon, all commerce will be on the cloud, and immediately after that in the hands of Big Tech, thanks to what’s called “PSD2”.

A January 2018 regulation, the Second Payment Services Directive (or PSD2) will make customers’ payments data from retail banks available to the whole European fintech ecosystem (here’s a Medium article on it). This is a big challenge for banks, introducing competition on an asset that traditionally they have had first, second, and third dibs on – where you spend your money. PSD2 will open up a new kind of open banking, in which fintechs, tech firms, telecomms, and even retailers can add their expertise to the data banks have been collecting as our money-men.

But lets backtrack. What is our payments data (and who cares)? Our bank accounts contain over 70% of all consumer purchasing, collectively billions of euros of spending habits. How much we spend grocery shopping, at which supermarket, in which cinemas, and on what commuter lines. PSD2-covered information says a lot about us and how we live our lives, and it is valuable to a lot of people (including the grocery stores, cinemas, and gas companies).

None care more than the advertisers. These currently spend shed loads of money for access to the personas of each and every one of us – feeding us different content depending on the ‘signals’ we send out – signals like our likelihood to buying nappies, Netflix subscriptions, or natural oat granola. Who sells these signals? Who else but those who ‘own our day’: Google, Facebook and Amazon. The tech giants guide advertisers on how to optimise their access to you and what signals they should buy, for what content. How good are these signals, you say? Given how much data they hold, pretty good. And they are about to get much, much better with personal spending data.

For just the last month, my spending data says I regularly train to London, enjoy fine dining and Japanese food, and go to a physiotherapist not quite as often as I should. What’s that worth?

To the world’s technology goliaths, it’s worth buckets. This regulation gives them the ability to add payment and purchasing to their social and demographic data but noticeably not the other way around (banks aren’t being legislatively allowed to access your what you search on Google). Of course, this must only happen with our consent (they are not about to grab it without our say-so) but the service they can offer for that consent will be oh-so-wonderful and convenient we will most likely say yes, (especially as our banks are so crap at so many of our banking services). With consent, algorithmic insights into our data will give their advertisers much better targeting results, increasing the value of their signals sold to advertisers. On our part, we will buy even more, because these ads will genuinely be more relevant and by doing so, we will continue to reinforce that model.

So now the shift from our banking, manufacturing, and retail economy to our digital one will continue, but faster. While we’ll get the ever-cheaper shoes and personal ads, we’ll depend on Google, Facebook and Amazon for even more of our lives. The two behemoths of banking and advertising are coming together, with the tech giants as our gatekeepers, governors, influencers and day coaches. If we don’t control the information they’ll collectively contain, we’ll get squished, depending more and more on an Internet built by others to deliver us what we need and love.

(This post originally published on Mediun on the 12 Jan 2018)

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