The proposed Payment Services Directive II (PSD2) set by the European Commission in 2013, is expected to be implemented by all member states into law by January 13, 2018. Its main objective is to ensure enhanced consumer protection, safe payments and encourage innovation. However, some see these new regulations as obstacles against providing innovative solutions for banking.
What are PSD2 regulations?
These are the new European Union banking regulations which will govern the protection and sharing of data across Europe. The regulations will give non-banking third parties such as Amazon and small fintech companies among others, the ability to access a customer’s data and perform payment services.
What are the advantages of PSD2?
One of the major advantages of these regulations is that they will provide huge opportunities by combining the strengths of fintech companies with those of banking institutions. The ability of financial programs to communicate with each other through Application programming interfaces (APIs) is seen a welcome revolution to the banking system. The API technology enables financial institutions to monitor who, when and where data is being accessed from. This enables greater consumer protection. PSD2 will also mean that screen scraping (a method considered less safe for accessing consumer data by third parties) is abolished.
What are the disadvantages of PSD2?
It is feared that banks could be slow to respond and thus would be playing catch up with fintech companies. Furthermore, it is possible that customers will be concerned about third-parties having legitimate access to their data. Fintech companies also argue that abolishing screen scraping will have some negative effects, such as payments not being executed in real-time. They emphasize that abolishing screen scraping will give banks an undue advantage by enabling them to be biased on some fintech companies or hindering new entrants.