If you are in fintech you might have probably heard about PSD2 Directive. So let's take a closer look at what it is and what business opportunities it can bring?
Starting from 2013 the revised Payment Service Directive was proposed by European Commission.
Key goals
- Standardising, integrating and improving payment efficiency in the European Union
- Offering better consumer protection and new data security standards
- Promoting innovation in the payments space and reducing costs
- Incorporating and providing clarity on the use of emerging payment methods such as mobile payments and online payments
- Create an equal playing field for payment service providers – enabling new companies to get into the payments space
- Harmonise pricing and improve the security of payment processing across the European Union
- Incorporate new and emerging payment services into the regulation
These principles apply to any institution that has a payment account accessible online. It means that all EU banks should create an Open banking ecosystem to comply with this new regulation by creating publicly accessible APIs. Although it should be fulfilled by 2020 financial institutions can be charged if they won't comply.
So what about opportunities for startups or new features of already existing financial applications?
1) First of all, this is payment initiation
At this point, if you want to buy something online you need to input your card data and the payment will be executed through an intermediary like payment service provider. After PSD2 you will be able to give the merchant a permission to use your bank account information to get charged directly without any additional hassle. This brings all sort of one-tap payment solutions (like CoinyPay) to become a standard in the e-commerce market.
2) Multi-banking simplifier
If you are a client of several banks, you probably have several online banking accounts (i.e. dedicated mobile apps or websites). After PSD2 new applications will emerge providing you all of your accounts' data in one robust interface. However, those services won't get a chance of using your banking information like transactions, amounts, recipients or else for any other purpose than providing it to you or to issuing a payment as stated in 1). That said they will still get a chance to monitor and analyze your buying behavior to provide you with cross-selling and up-selling options.
Conclusions
Basically, any banking data of the user will become accessible via Open banking APIs for applications to use if the user opt's in for it. This opens a huge amount of simplifications and significantly re-shape the modern fintech space. Merchants would connect to banks directly and will get an ability to initialize payments. And many companies will be able to provide you with a consolidated view of your accounts and transactions.
Important to say that banks and other compliant institutions won't charge their customers any additional fees for getting serviced through these new apps and APIs, while those companies leveraging Open banking APIs can. For instance, if you ask a 3rd party app to transfer money from your bank account 1 to your bank account 2 - your commission won't exceed your standard commission if you do it via your standard banking interface. While this 3rd party will be able to add a commission of its own.
That's all for now! Let me know about your vision of PSD2 ups and downs in the comments!
Thanks for reading :)
Sources used:
(1) http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32015L2366
(2) http://www.sepaforcorporates.com/single-euro-payments-area/5-things-need-know-psd2-payment-services-directive/