The European Parliament adopted the European Commission's proposal to make European payments safer and more innovative (PSD2, Directive (EU) 2015/2366) on October 8, 2015. The present guidelines are intended to better protect consumers when making online payments, promote the development and usage of new online and mobile payments, such as open banking, and make cross-border European payment services safer.
Users who have an online banking account can now make payments or see their bank statements using software produced by licensed third parties under the new Payment Services Directive (PSD2) (PISP and AISP).
To comply with regulatory requirements, European banks must disclose their data and infrastructure. Despite the fact that PSD2's stated focus is on payments and account access, its effects go much beyond that.
Banks could take an ecosystem or platform strategy by integrating third-party capabilities into their core business products through APIs, resulting in new revenue models and income streams. Banks might work with other infrastructure providers, corporations, and FinTechs to reduce the cost and time it takes to bring new products to market.
While most banks' initial focus for PSD2 was on retail banking, strong competitors are already using open APIs in transaction banking and investment services to provide superior customer experience, knowledge, and value to corporate and retail customers, while also extracting bank-wide efficiencies.
PSD2 will promote open access to payment systems and accounts, hence increasing competition in the payments sector.
Although PSD2 may be seen as a threat to payment processing firms with its traditional business models, there is potential to provide integration services into third-party networks and apps, as well as merchant point-of-sale systems.
PSD2 may have an impact on credit card firms' and card divisions of banks as retailers and other businesses transition to open APIs instead of card processing. Visa and Mastercard have launched new innovation efforts aimed at generating new revenue streams and services.
Because of the "Third Party Access" rules, PSD2 will not only produce new PSPs, but also new competitors. PSD's Open Banking rules allow non-banks, corporations (such as Amazon), and FinTech enterprises to acquire direct access to consumer bank accounts in order to conduct payments and/or obtain customer data. According to one UK retail bank, if the ten largest retailers become PSPs, they might lose £20 million per year in revenue.
Users are embracing new technology from the standpoint of the end user; the amount of online and mobile payments has expanded dramatically, and customers will be able to make rapid payments via mobile wallets on various p2p accounts and toward operators with complex capabilities.
Greater cost transparency and charge protection, as well as reduced liability for customers who make fraudulent payments, will improve consumer protection.
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