Comment on PSD2

On 13th January 2018, the new payment services directive (PSD2) came into effect across the European Union. Its aim: to further promote competition for European payments and making the sending and receiving of payments safer and cheaper. But with more than 18 months until the deadline to implement the associated regulatory technical standards (RTS), banks and other payment service providers are not immediately applying the necessary security measures and communication tools. As a result, there may be a lack of harmony across the EU for payment service providers until the RTS becomes legally binding towards the end of 2019.

A crucial aspect of PSD2 is the abolition of the monopoly that banks have over accessing their customer’s account data. This will strengthen the position for financial start-ups, as well as promote the development and use of innovative online and mobile payments. For example, banks will now have to offer at least one interface that allows other payment service providers to access the account of those customers giving their consent to it.

Banks originally wanted such data to be queried only indirectly through separate interfaces and not directly via their existing online banking. But the guidelines now stipulate that banks cannot just block this anymore, which will remove the barriers to entry and sharing of data, helping enhance the customer experience further. To the contrary, banks now have an incentive to offer not just a minimalistic interface to their competitors, but a comprehensive and efficient API, which can facilitate a step change. This could then lead to improved applications and enhanced functionality for the consumer.

Not all EU countries managed to implement PSD2 on the date specified, hence some grey areas are remaining and this will continue until the material changes that have been so hotly debated in recent months, will come into force in the third quarter of 2019 (with the RTS). However, there is a lot to do, and both banks and fintechs would be well advised to get ahead with their necessary developments now.