International Banker posted a concise summary of the new EU regulation, Payments Services Directive 2:
Introduced in 2015, PSD2 grants third party providers (TPPs) access to bank customers’ (both consumers and businesses) online account & payment services in a secure and regulated manner. This most recent iteration of the payment services directive should make European payments even safer, but that’s not without adding significant hurdles that banks must clear along the way. Via PSD2, the European Commission seeks to drive competition and innovation whilst enhancing consumer protection and the security around internet payments and account access.
The analysis of what this means to banks is not particularly cheery, namely banks will lose customers as fintech organizations design new and creative products based on data they have gathered from financial institutions, and banks will have to spend more to provide the data and secure it:
What does all of this mean for the retail banking industry at large? Well, according to Accenture, nine percent of retail payments are predicted to be lost to PISP services by 2020. Additionally, IT costs (particularly when delivered by a traditional on-premises environment) in order to enable the required API access and the resultant security enhancements, will increase.
Some high level suggestions regarding how to navigate these new waters was outlined; name acting quickly to develop solutions to create fewer reasons for consumers to look outside, monetize the data banks currently have, and collaborate with fintech organizations so the customer experience is mutually beneficial. As long as these pursuits are accomplished while still protecting client data, consumers and businesses will enjoy more financial services options.
Overview by Sarah Grotta, Director, Debit Advisory Service at Mercator Advisory Group
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