The PSD2 aims to create a level playing field for all kinds of players in the European payments market. The goal of the directive is to enable new payment services, ensure transparency and fair competition to the benefit of consumers. As a result new players, called Third Party Providers, are entering the payment ecosystem, and will force traditional European banks to make their positioning on the value chain evolve.
PSD2 – Fundamentally changing the ecosystem
The Payment Services Directive 2 - or PSD2 - is one the most radical pieces of legislation aimed at the payments industry and the banking sector since the aftermath of the global financial crisis. The new directive introduces the role of Third Party Provider (TPP) in the banking ecosystem in two categories: Account Information Service Provider (AISP) and the Payment Initation Service Provider (PISP). This role is open to current and new players in the financial industry.
The number one challenge for all banks caused by PSD2 is how to implement the requirement of providing TPPs access to accounts (XS2A) in a cost-efficient manner without jeopardizing the bank’s security and losing customer relationships. But it’s not only a matter of challenges: PSD2 also offers a huge potential for banks.
New opportunities arising from PSD2
Despite obvious reasons for concern banks may have, PSD2 also represents a unique strategic opportunity for them.
Concern among banks
The access to account requirement is disruptive in several ways. Becoming compliant will impose substantial costs on banks, while revenues may be lost to TPPs. Banks need to find secure and efficient ways to provide access to customers’ accounts for the potentially huge number of very diverse TPPs. At the same time, they continue to be liable for all transactions – including those initiated by a TPP. And last but not least, they risk losing the highly valued direct relationship with their customers and thus risk being reduced to a role as basic infrastructure provider.New opportunities
Despite these reasons for concern, PSD2 primarily represents a unique strategic opportunity for the banks, if only they have the courage and the innovative power to seize and unfold it. The role of TPP is open to current new players in the industry. This means banks can become TPPs too and tap into competing banks’ accounts in case they want to launch payments solutions themselves (as a PISP) or launch information/data aggregating services in the role of an AISP. It is not only in the consumer-facing services that the opportunities lie. Banks also have the option of offering the TPPs services beyond those stipulated by the PSD2. These premium services could for instance include real-time account information access for AISPs. These new opportunities for banks are key reasons why the XS2A requirements might be in favour of the creative and forward thinking banks. But more than this, the PSD2 requirements might animate the banks to start using open APIs (although there is no obligation in the directive for the banks to do so) and gather initial experiences with the concept of Open Banking. PSD2 points in the direction of Open Banking and is likely to inspire banks to innovate faster than they otherwise would and keep the bank account in the centre for this innovation.
Michael Salmony, Strategic Advisor at equensWorldline
"Open access to bank accounts has the potential to lead to an explosion of innovation, competition and new services. New revenue streams will evolve and the banks themselves could even be one of the main beneficiaries from this dynamic environment - if they position themselves in a timely and proactive manner.”
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Practical step-by-step guide for banks
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Shaping the future of PSD2
Being a European company with profound knowledge of the European financial market, equensWorldline plays an active role in two of the central entities shaping the future of PSD2 implementations across Europe – The Berlin Group and CAPS.
The Berlin Group is (despite its name) an international group focused on developing interoperability standards for payments across Europe. Based on our pan-European insights and experience, equensWorldline actively contributes to the standardisation work. At the same time our participation ensures that we stay in the forefront information-wise. Obviously, all to the benefit of our clients.
The same ambition underlines our involvement in CAPS. Basic compliance one thing. But in order for PSD2 to really work and get traction and scale, a number of other things needs to be put in place. This can be everything from directory services, dispute management services, development tools, authentication solutions, mobile integration to name but a few. By gaining insight and influence through equensWorldline’s involvement, we can ensure that its service offerings remain relevant to our clients.
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A lot has already been said and written about PSD2, Access to Accounts and the impact of this new regulation on the payments industry. Alessandro Baroni, CMO of equensWorldline, elaborates on this hot topic in an extensive Q&A interview, giving his vision on some crucial aspects of PSD2
CAPS is a new and open framework that aims to help banks on their way towards the fulfilment of the business potential in PSD2. The CAPS framework provides joint pan-European PSD2 standardized interfaces and operational procedures. CAPS is the perfect springboard for progressive banks who want to get the most out of PSD2 by introducing open APIs and take the first steps towards the future of Open Banking.
Having profound knowledge of the European financial market and offering a comprehensive portfolio of services and solutions that perfectly fit into the PSD2 ecosystem, equensWorldline is in a unique position to assist banks in asking and answering the important strategic questions brought on by PSD2.