We help our clients from all industry sectors maximize the benefits from the European PSD2 Regulation.
2020 is set to be a game-changing year for retail banking. As the Revised Payment Service Directive (PSD2) became implemented, banks’ monopoly on their customer’s account information and payment services is gradually disappearing. The PSD2 is a data and technology-driven directive which aims to drive increased competition, innovation and transparency across the European payments market—while enhancing the security of Internet payments and account access.
PSD2 brings the following key changes to financial services:
- Scope is extended beyond Europe and the definition of a Payment Institution is expanded. While the original PSD applied only to transactions occurring within the EU, PSD2 extends this scope to “one leg out” transactions. The directive also extends the 2007 PSD definition of “Payment Institution” to include new categories of third-party payment providers.
- Third-party payment initiation. PSD2 encourages competition in European payments by regulating payment initiation service providers (PISPs). These services operate using a “push” payments process unlike the traditional, card-based “pull” payments flow.
- Third-party account access. PSD2 also regulates account information service providers (AISPs). These providers act as aggregators of customer payment account information.
- Prohibition of card surcharges. PSD2 seeks to standardize the different approaches to surcharges on card-based transactions which are currently applied across the EU.
- Security of online payments and account access. PSD2 introduces new security requirements for electronic payments and account access, along with new security challenges relating to both AISPs and PISPs.
In short, PSD2 enables bank customers, both consumers and businesses, to use third-party providers to manage their finances. You may be using third-party applications to pay your bills, make money transfers and analyse your spending, while still having your money safely placed in your bank account. Banks, however, are obligated to provide these third-party providers access to their customers’ accounts through open APIs (application program interface). This enables third-parties to build financial services on top of banks’ data and infrastructure.
Banks no longer are only competing against banks, but everyone offering financial services. PSD2 fundamentally changes the payments value chain, what business models are profitable, and customer expectations. Through the directive, the European Commission aims to improve innovation, reinforce consumer protection and improve the security of internet payments and account access within the EU and EEA.
The big winners from PSD2:
- Payment service providers
- Other fintech companies
- Retailers (both online and offline)
- Telecommunication companies
- Utility companies
Most disrupted by PSD2:
- Payment card operators