doubt that PSD2 has become something of a buzzword in the last year, dominating
conversations in banking and fintech across Europe.
prepare for the activation of PSD2 in January 2018, there’s no doubt that the
legislation will be the key talking point at this year’s Money 20/20 Europe
event in Copenhagen.
take a moment to review what PSD2 actually is, how it’s shaking up fintech and
what industry players need to know to get ahead.
PSD2 is the
second iteration of the Payment Services Directive. It is a revision of the
2007 legislation drafted by the European Commission to
promote the development of the Single Euro Payments Area (SEPA), instate
industry standards and terms and conditions, promote transparency and increase
competition in financial services across Europe.
directive aims to improve innovation, strengthen consumer protection, and
improve the security of e-commerce transitions and account access within the EU
undoubtedly good news for consumers and business banking users, but a daunting
task for many banks.
some serious work to do to achieve compliance with the new regulations and the
January 2018 enactment date is no doubt raising concerns. The impending
deadline is also catching the attention of fintech providers keen to capitalize
on the opportunities the new directive presents.
challenges of PSD2
presents a number of challenges to banks:
Security and authentication
The revised directive mandates far more advanced levels of security for
both online and in-app purchases to ensure data protection and privacy.
To achieve this, the challenge for banks will be to install a number of
new strong authentication points at various stages of the transaction chain,
and to secure consumer data on mobile devices with hardware or software
Developing new APIs
Article 66, more commonly referred to as ‘Access to accounts’, is a key
point in the directive. Essentially, it mandates that customer-permitted
Payment Initiation Service Providers (PISPs) and Account Information Service
Providers (AISPs) must be granted access to bank accounts and financial data
through open application programme interfaces (APIs).
great for consumers, enabling merchants and other permitted parties to make
payments for consumers without redirecting back to a third party. But for banks,
the pressure is on to put these APIs in place, all to ensure the reliability of
the third-parties requesting access.
Changing business models
With banks being asked to give up their valuable data, new entrants to
the payments space are relishing the opportunity to deliver financial services
in new and innovative ways. Consequently, banks are now not only competing with
other banks, but also any companies licensed to provide these services.
In this increasingly competitive market, banks need to ensure they not
only achieve compliance, but continue to innovate to generate new revenue
streams and remain relevant. Delivering competitive, value-added services can
ensure banks keep up with new fintech companies entering the game.
There is no
doubt that PSD2 marks a profound shift for Europe’s payments ecosystem.
the key changes to the directive and the challenges they present will be
crucial for players to get ahead.
twenty years’ experience in the payments ecosystem, FIME has unrivalled
expertise to help make sense of the new regulations and how they will impact
Meet us at
Money 20/20 Europe to learn how FIME can help navigate a path to compliance and
equip you with the knowledge needed to best prepare for PSD2.