Banks, fintechs and other financial services providers will be gearing up their services for consumers in line with the second Payments Services Directive (PSD2). Here’s a summary of what can be expected.
- Applicable since the 13th January 2018, PSD2 is designed to give consumers – personal and business – greater choice and better protection when making online payments.
- PSD2 will facilitate greater choice by allowing more third-party providers to operate financial services on behalf of consumers. These third-party providers will offer ‘open banking’ services as follows:
- Account information services which will typically allow consumers to consolidate information related to all their accounts in one place without the need to log into separate applications; and to analyse their spending patterns, expenses, financial needs in a user-friendly way
- Payment initiation services which will typically allow consumers to make online payments directly to recipients without use of a card or logging onto a bank’s system
- PSD2 requires existing banks to share customer data with authorised third-party providers where the customer gives consent. This will be done through APIs (application programme interface) which banks are currently developing.
- PSD2 will facilitate consumer protection by requiring these third-party service providers to be authorised and regulated by the national competent authority, such as the Central Bank of Ireland. They will be prohibited from accessing any other data from a customer’s accounts beyond that explicitly authorised by the customer.
- New regulatory technical standards (RTS) will introduce security requirements – including strong customer authentication – which service providers will have to observe when they process payments or provide payment-related services. The RTS are expected to become applicable around September 2019.
- PSD2 introduces new rules which prohibit ‘surcharging’ for card payments in most cases.
- PSD2 stipulates that, except in cases of fraud or gross negligence by the consumer, the maximum amount a consumer could be obliged to pay in the case of an unauthorised payment transaction will decrease from €150 to €50.
PSD2 is expected to stimulate considerable innovation and competition in payments to the benefit of consumers. The months and years ahead will show how this will materialise as between new authorised third parties, fintech firms and existing financial institutions in the form of competition and collaboration.