PSD2 - The Revolution that Never Happened

Abstract

The introduction of PSD2 was expected to revolutionise the financial industry and disrupt established banks’ business models. However, the changes have not been as dramatic as expected. Mainly this concerns the predicted increase in innovation speed. The purpose of this thesis is to explore the responses taken by large Swedish established banks in relation to the introduction of PSD2. Also, the study aims to explore banks’ perceptions of the directive, from its announcement to practical implementation. The perceptions and responses will be explored through a multi-firm case analysis, based on interviews with four large and established banks in Sweden and an industry actor and authority. Through the perceptions and responses taken by the banks we find that PSD2 has introduced competing institutional settings in the banking industry. These competing settings emerge from banks’ traditional institutional setting and the institutional setting of third-party providers (TPP’s) which are forced to work together due to the introduction of PSD2. Further, PSD2 constitutes an institutional pressure forced upon the banking industry and we find in this thesis that banks tend to respond more passive than active towards this specific institutional pressure. A specific response towards institutional pressures defined in previous literature is decoupling. It is not possible to conclude through the findings of this thesis if decoupling has been present or not in banks responses towards PSD2. However, there are signs that decoupling might occur in this setting and the lack of materialised expected effects of innovation speed brings suspicions towards that decoupling might have occurred, at least historically. Lastly, this thesis finds that the institutional pressure of PSD2 works as a starting point for the disruptive business model innovation of open banking. Banks’ perceptions of PSD2 indicate that banks are aware that PSD2 can bring a disruptive business model innovation to the industry but they lack effective measures to respond to the innovation. The banks seem to not have the abilities to adapt to the innovation due to the size of conflict between the traditional and the new business model.