One of the critical unanswered questions early in the Single Euro Payments Area process and the new Payment Services Directive in Europe was whether banks would pony up for needed technology upgrades.

It appears European banks consider faster payments and better operational efficiency to be solid revenue generators, as 62% of the continent's financial institutions expect to increase spending on payments technology throughout 2017 to support those upgrades, according to new research.

European banks are at the forefront of the payments modernization process as they strive to update their legacy infrastructure for real-time payments and the European Union's revised PSD2, said London research firm Ovum after a survey of more than 500 banks worldwide.

PSD2 essentially calls for an open market for payments technology development, allowing more startups to have a place in the financial services field — and creating opportunities for banks to invest.

Attitudes toward the benefits of instant payments are positive among the banking fraternity, with improved customer propositions, increased revenue opportunities and potential cost reduction all viewed as constructive outcomes, Ovum reported.

However, with PSD2 getting much attention now, the arrival of open APIs is splitting industry opinion even though it is generally thought open interfaces will provide the best access to new payments technology. While 59% have a clear strategy for creating open APIs and interfaces for developers, 45% also report they will take a "wait and see" approach to PSD2 changes.

Concerns about security and liability remain a challenge for 42% of institutions surveyed, with no clear guidance over the reputational and customer impact of fraudulent use of customer data arising from a third-party breach.

“The market is rapidly changing — banks must invest wisely in core payments platforms and infrastructure to take advantage of relevant opportunities,” Kieran Hines, head of industries at Ovum, stated in the July report.

“Financial institutions that proactively shape strategies around open APIs, fraud prevention and immediate payments will reap the benefits when it comes to both customer experience and revenue,” Hines added.

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