5 January 2021
PSD2 has not led to a revolution yet
With the implementation of PSD2, new rules on payments would open up the financial world. But so far, the introduction of PSD2 has not (yet) led to the promised revolution. The revised European Payments Directive – which was implemented step by step more than a year ago – was supposed to lead to more competition and innovation. However, concrete use cases are not yet popping up in Europe in abundance.
According to Gijs Boudewijn, this is no reason to panic. And he should know, given the positions he holds in the world of payments. For example, Boudewijn is Vice Chair Payment Systems Committee at the European Banking Federation, Chair Legal Support at the European Payments Council and Deputy General Manager at the Dutch Payments Association.
According to him, the current situation shows how well payment traffic in Europe was organized before the introduction of PSD2. “Fintechs, bigtechs and other players with innovative ideas grab space where banks fail. Where friction occurs and customers are not satisfied. It is not easy for them to make a big and compelling difference”, says Boudewijn.
Boudewijn says that we should not forget that PSD2 has not even been introduced entirely yet, due to the fact that the deadline for the implementation of Strong Customer Authentication (SCA) was the end of 2020. Boudewijn: “But PSD2 already did the job before its implementation, as a wakeup call for the incumbent banks. The digitization wave was already underway from the moment PSD2 was announced in 2013. As a result, the services provided by existing banks have continued to improve. Look at bank apps, for example. The payment system is already very well organized in large parts of Europe, we should not forget that. Many customers are satisfied with the current payment set-up. That is why it is difficult for a fintech to add value".
“It is not easy to be unique”, says Boudewijn. “Fintechs and other new finance players are mostly agile, innovative companies, but if they start getting involved in the regulated business of banks, things change. Then you have to hire compliance people and legal advisors instead of developers. As a new entrant, it turns out to be quite difficult to create a business model, because your solutions have to be better, faster and cheaper than what we already have in place. But at the same time, they need to comply with all regulations. That is not an easy task. That is why there haven’t been any landslides yet.”
Use of payment data
Another reason why few new use cases have landed in Europe is the fact that consumers rarely give their consent to the use of their payment data. In the Netherlands, this number is less than a quarter, according to research by the Dutch Central Bank (DNB). It is mainly their own bank to which consumers entrust their data. For example, only 2 percent gave permission to large technology companies such as Apple, Facebook and Google.
“This has to do with trust”, Boudewijn explains. “Trust in banks is still high. We do not find it strange that banks have our payment data, but we are not willing to share data with other parties yet. Which is actually quite strange, because on Facebook it is normal to share private photos, but payment data seems a bridge to far. Maybe the next generation feels less uncomfortable about sharing data with tech companies.”
According to Boudewijn, companies that want to receive payment data from consumers have to do something in return. “Why would a consumer share his or her payment data? To help a tech company? No, there must be something in return. For example, good and personalized offers. Furthermore, a consumer does not want his or her data to be misused. They also want to be in control of their data. Trust, control and added value, that is important for the consumer.”
So PSD2 has not yet caused a landslide, but according to Boudewijn Europeans do not complain about the set-up of our payment system. This year, PSD2 legislation will be reviewed as well, to see whether it needs to be updated on certain points. “Then it may turn out that not everything has gone well, but as I said earlier, European citizens certainly do not have a bad payment system at their disposal. Changing consumer behavior takes time, so I am convinced that in the future there will be interesting use cases popping up. We just have to give it a little bit more time.”