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psd2 and the future of payments

Payment to Become a Key Factor in Effective Sales

A new landscape of retail banking is emerging under the PSD2 directive in the European Union, providing banks with a chance to become not only platforms for the payments of tomorrow but also to position themselves with new services to consumers.

The new regulatory framework PSD2 (Revised Payment Service Directive) is going to open up retail banking in the European Union to a wide range of competition. Starting from January 2018, social networks, telecom companies, retailers, fintech startups or players from other industries will be able to offer retail banking services.

The idea behind PSD2 is to kick-start innovative services and products that will fuel cross border banking and create a single EU digital market for financial services. Banks are still going to be the key ingredient in the banking business, but they will become platforms on which new retail banking is going to emerge. Banks will remain, but they will not remain the same. Neither will banking.

KEEPING PACE WITH PAYMENTS TECHNOLOGY

In the next 3-5 years, it is expected that investments in financial technology globally will ten-double, exceeding $150bn, according to EVRY.

PSD2 obligates banks to provide third-party providers access to their customer's accounts through open API (application program interface). Private or business customers are going to be able to pay bills through any new app they choose.

They will be able to make money transfers in that app, analyze spending in it, etc., all the while having money safely paced in their current bank account.

Although banks are still concerned about whether PSD2 will actually work, there are many opportunities for banks in the new retail banking ecosystem.

As much as 37% of European consumers claim they would change their bank if it did not offer them up-to-date technology. This can be seen as an obstacle but also as a great opportunity. Banks have a strong advantage over competitors at this point.

A survey conducted by the European Commission revealed that 80% of customers would not consider buying a financial product in another EU member state. So keeping pace with payments technology is both a must for customer retention and a key factor in effective sales.

PSD2 Timeline

  • December 2007 – The final text of the Payment Services Directive (PSD) was published
  • July 2013 – The European Commission published a PSD revision – PSD2
  • December 2015 – The final text of PSD2 was published in the Official Journal of the EU
  • January 2016 – PSD2 entered into force
  • August – October 2016 – EBA (European Banking Authority) consulted on Regulatory Technical Standards (RTS) on Strong Customer Authentication (SCA)
  • February 2017 – EBA published the final draft RTS on Strong Customer Authentication (SCA)
  • Throughout 2017 - EBA (European Banking Authority) finalized the guidelines and Regulatory Technical Standards (RTS) to implement PSD2
  • January 13, 2018 – PSD2 transposed into national EU law
  • November – December 2018 – The Regulatory Technical Standards (RTS) on Strong Customer Authentication (SCA) and Secure and Common Communications entered into force