| dc.description.abstract | The financial industry has been facing heavy regulatory changes since the global financial crisis in 2008. Several kinds of rules have been mandated across the financial industry in the European Union Area (EEA). Among the regulatory changes is the introduction of the latest Revised Payment Directive (PSD2) to the European banking landscape. This directive is set to revolutionize the European payment ecosystem and aims to drive stronger competition and innovation by opening up access to payments systems and making customer data available to third-party providers. In the PSD2 era, banks will no longer compete only with other licensed banks, but with every authorized third-party service provider licensed to offer financial services in the EEA. The goal of this thesis is to explore the implications of the most recent regulatory changes, PSD2 in particular, to incumbent banks within the financial industry. In addition, this thesis will propose some strategic options for incumbent banks to stay competitive and competent in the financial market. In order to understand the challenges that banks are currently facing, theoretical perspectives such as industry-based view, resource-based view, and institution-based view are explored during this study. The industry-based view is applied to evaluate the external forces that influence the level of competition in the financial industry. The resource-based view is used to examine the internal resources and competencies across both incumbent banks (as established actors) and Financial Technology companies (FinTechs). Additionally, the institution-based view is used to investigate the relationship between organizational structure, strategic choices and performance in the market. Applying the abovementioned theories to examine the implications of PSD2 and the changes it brings to the financial industry, two case studies have been surveyed in this thesis. The first case considers incumbent banks and the second case FinTech companies, which are the high-tech newcomers to the banking industry. To provide analysis, the Qualitative research method is applied in form of semi-structured open interview guide. The conclusion from the analysis based on the conducted interviews suggests that technological innovations and increasingly changing customer demands are among the key factors that are revolutionizing the banking industry. Thus, in the new financial market created by PSD2, we might see an exponential growth in customer’s trust in Third-Party Providers (TPPs), such as FinTechs. One way of dealing with these challenges for the incumbent banks, is to leverage their first-mover advantage, over the new competitors that enter the market. Therefore, this study proposes the following two strategical approaches for incumbent banks to pursue, in order to remain competent and competitive; opportunistic and transformative. Among the suggested opportunistic approaches, incumbent banks may consider embracing open banking in an attempt to turn threats to opportunities. Furthermore, they could rethink and redesign their business models through becoming TPPs, selling insights, contributing to accelerator programs, and leveraging collaboration in form of partnership or acquisition. When considering the transformative strategic alternatives, turning into a banking platform might be a promising choice. The exciting research area to pursue in the future would be to monitor PSD2 impacts after its full implementation across the Europe. It would be interesting to study whether European incumbent banks have survived the competition in the market in the years to come. Moreover, it would be interesting to study what kind of strategic options incumbent banks will end up using to strengthen their position in the market. In addition, it might be worth it to investigate how the interaction of PSD2 with the EU’s General Data Protection Regulation (GDPR) could be beneficial for banks, FinTechs, and customers. | eng |