The Payment Services Directive (PSD2), which came into force last January 13, entails fundamental changes in the payment industry and aims to promote competition, innovation and security. A two-year phase began on that date that will culminate in its transposition into national law in 2018, when third-party payment providers (TPP) will be given access to client accounts.
New technological capabilities have led to new disruptive business models in many sectors, and the financial industry is no exception. Purchase and payment methods in the European Union have evolved and new non-banking players have emerged, offering their products and services and placing themselves between the user and the financial institution. TPP are highly innovative, nimble and efficient, and offer a very good user experience. The drawback is that today they use the infrastructure of regulated institutions, but with poorly defined security conditions and responsibilities.
This is clearly a new playing field where bases will have to be established in the relationship between banks and TPP, given that a contract between the parties will not be required, but the banks will have to provide access to third parties without discrimination, once they have been authorized by the client.
New technological capabilities have led to new disruptive business models in many sectors, and the financial industry is no exception
Other key aspects of PSD2 are:
- It extends its scope of application to transactions where one of the parties is in the European Economic Area (one-leg-out transactions) as regards requirements of transparency, information and user rights/obligations1 and in operations in any currency
- It proposes the strengthening of security measures, both in online banking channels and in communication with TPP
- It establishes a new regime for assignment of responsibilities between financial institutions and TPP, in the case of unauthorized transactions
- It maintains the possibility of limiting the right of reimbursement in SEPA debits
More innovation in the European payment scene
PSD2 is not only a new regulation that needs to be complied with; it is the starting point for a new open banking ecosystem
Thus, PSD2 is not only a new regulation that needs to be complied with; it is the starting point for a new open banking ecosystem. Specifically, along with other European initiatives it is expected to create a good framework to promote innovation in payments. This affords both financial institutions and the new players the possibility of offering more convenient and faster solutions, as well as new value-added services to the clients, who will be the true beneficiaries of these new rules.