How digital platforms use regulation to their advantage

Regulatory tailwinds may make a target market particularly ripe for platform transformation

How does our platform design leverage such regulatory tailwinds?

This article is part of the Digital Platforms hub

As much as regulatory headwinds slow down platform execution, they can help accelerate platform adoption.

Consider the financial services industry where regulatory forces are pushing the industry towards increasing openness, platform-based organization and distribution of value. As an example, the European Union’s payment services directive (PSD2) creates the legal framework for enabling an EU-wide single market for payments. This poses a regulatory requirement on European banks and other payment services providers to open up third-party access to customer account data. It also allows third parties to initiate payments on the customer’s behalf. As these regulatory tailwinds force greater openness and dissolve banks’ control over customer data, they enable third parties to innovate on customer data by provisioning new services. In Africa, the National Bank of Rwanda (BNR) has modeled its approach on the EU’s PSD2, including the provisioning of a regulatory “sandbox” for testing financial innovation in a controlled setting.

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