PSD2 and open banking: are you ready?

PSD2 and open banking: are you ready?

The incoming regulations are designed to make online payment services more transparent. They are also opening doors to European innovation. 

For the fintech sector, the PSD2 has created a market opportunity to develop innovative alternative payment methods that offer added value to consumers and allow them to make payments efficiently and securely. Retailers are optimistic about the regulatory changes because they believe that the new regulation will allow them to offer better customer experience across the board, reports Accenture. One third of the 80 retailers surveyed will be able to directly receive consumer information (normally through APIs) and initiate payments with banks for the Jan 13 deadline. Most European countries won’t make the Jan 13 date; the Netherlands is looking to implement the PSD2 next summer. 

As noted in a previous article, the EC has decided to make the technical standards of the PSD2 applicable from September 2019 to give market players the opportunity to update security systems for the transfer of data. Early compliance still has first-mover advantages.

The PSD2 is a major step towards a unified European financial market. The opening up of banks’ networks to non-bank third parties will give consumers more power to interact with their financial institution without intermediaries. As such, PSD2 increases consumer choice within the ecosystem and competition among businesses and banks for customer acquisition and loyalty.

However, be warned. The directive’s lack of specific language means that implementation is unclear. Similarly, regulation of technology is difficult to apply in practice due to the speed of changing attitudes about technology. It is difficult to make truly reliable predictions of what will result from PSD2 when it comes to the financial market. Deutsche Bank released last month a report encouraging early adoption of PSD2 to ensure compliance when it becomes mandatory. The bank’s white paper recognised the difficulty of compliance due to the multitude of regulations that will enter into force in 2018. 

Licensed businesses will need to comply with new reporting requirements to national bodies. Being a directive, the regulation requires national application. Funding and capital management will also be subject to ongoing requirements under the PSD2. 

In the confusion of interpretation of the PSD2, one thing is clear: innovation. Early next year we are going to see a proliferation of alternative payment methods from companies that have already registered as PSD2 compliant with the relevant national regulator. We’re excited.

On January 15, Holland FinTech is hosting a members event in collaboration with the Dutch Payments Association: PSD2 in Business. During the event we will dive into the latest developments on implementation timelines, the impact of the published RTS, and the way forward on TPP licensing. There will be presentations from Betaalvereniging, DNB and Klarna. We are dedicated to facilitating discussion and debate in the fintech industry. We learnt much from our PSD2 Roundtable last November with Baker & MacKenzie and hope to do so again next month. 

The event is for Holland FinTech members only. For enquiries please contact darya@hollandfintech.com

By Grace Appleford, Research Analyst for Holland FinTech.

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