Payment Services Directive II (PSD2) arrived in Europe on 13 January 2018, after two years of planning. The idea behind EU having this regulation is to open access to services and data to third-party service providers, a privilege which was initially limited to banks only. Banks will permit financial service providers to access their clients’ accounts via an Application Program Interface (APIs).
What is the Effect of PSD2 on Banks and Customers?
With non-bank payments service providers expected to have access to bank APIs, the customers are undoubtedly the biggest beneficiaries of the regulation. Fs and conventional banks, however, may not be excited by the idea of having third-party access their APIs. The law aims at heightening competition between banks and financial service providers, and not just against themselves.
Banks will have to increase their spending, especially on the IT infrastructure since new security measures need to be integrated together with allowing APIs access. Financial sectors will also find it hard to differentiate their role in lending money to clients with the inclusion of non-banks in the system. PSD2 is expected to change customer expectations, the type of profitable business models and the payments value chain.
Players Integrated into the Financial Landscape
With the European Commission aiming to improve internet payment security, consumer protection reinforcement and innovation, two new players are incorporated in the financial sector: PISP and AISP. Payment Initiation Service Provider (PISP) are the services providers who are mandated with instigating a payment on behalf of the customers. Bill payments and Peer-to-peer (P2P) are some of the PISP services that will be experienced with the implementation of PSD2. Account Information Service Provider (AISP) on the other hand have access to the client’s bank information. Such service providers will be in a position to cumulate a customers’ bank information from various banks into one synopsis or analyse their spending behaviour.