PSD2 - A New Open Banking Payment Ecosystem

Revise Payment Service Directive (PSD2) is a new regulation provided by EU Directive, administered by the European Commission (Directorate General Internal Market) to regulate payment services and payment service providers throughout the European Union (EU) and European Economic Area (EEA).

PSD2 provided enormous opportunities to Banks, Customer and FinTech companies around the globe. This will enable huge competition across Banks and FinTech companies to provide better service to its customers.

PSD2 in short will provide the following benefits,

-Provide simple unified platform for the customer to access all accounts, transactions across the banks.(EU)

-Reduce transaction cost with enhance security features.

-Enable new FinTech Companies and third party player to enter Financial service arena by allowing them to access
-AISP - Account Information service Providers
-PISP - Payment Initiation service Providers

-Increases competition across FinTech companies and Banks to enable them to provide innovation solution in payments and financial services.

As Bank, PSD2 will provide the following advantages

•  Provide extended services to its customer via Exposure of API’s to FinTech companies which will enable to increase market presence of the bank to it customer and new prospects.

• Consents are accepted from customer for account / transactions well before the exposure of customer data to any platform. 

• As per earlier PSD (Payment service Directive) customer is allowed to do transaction as per respective currencies (for example GBP, PLN and of course EUR) only. PSD2 enables customer to do transactions across currency.

• Profits of the bank will gradually increase due to heavy competition who provide better service to its customers

• All Payments irrespective of currency will use “SHA” Shared Payment charges across banks. The SHA charging option means that the Payment Originator pays their bank charges and the Payment Beneficiary pays their bank charges). 

As Customer, PSD2 will provide the following advantages

• Customer have many choice to choose across FinTech companies who Provide better services and security to access their bank account and payment processing services. Customer expects to have ease of application usage. 

• As PSD2 enables customer to view all bank account balance / transactions in a unified dashboard platform which will help customer to make fast decision for their investments and other banking services.

• Payments across banks can be initiated from unified platform which saves cost and time for the customer rather logging into different banking applications.

• Customers are provided with two factor authentication while accessing the application or processing the payment transaction from the unified platform.

• PSD2 Provides predefined Payment dispute resolution process which will provide support to customer when there are any disputes arise during payment processes. In 15 days Payment complaints has to be addressed and resolved and in exceptional cases to 35 business days. 

As FinTech Companies, PSD2 will provide the following advantages

• As FinTech companies will join as new entrants to banking space, as they will provide services what banks are currently doing and enable competition across banks to the customer.

• There will be new innovation by providing access across various channels like Mobile Banking, Online Banking, Tab Banking and exposure of services through various other channels and social media like Google, Facebook who will provide payment services via these FinTech companies.

• Innovative solution will be provided by FinTech companies which will provide more customers to the traditional banks.

• FinTech Companies provide Strong Customer Authentication (SCA) which will enable customer to access the application via two factor authentications like E-Tokens, biometric, SMS OTP or fingerprints.

• Regulatory Technical Standards (RTS) are provided by EU Commission and all FinTech companies have to adhere to the same while developing and implementing of PSD2 solutions.

Going forward, Customers are provided with more innovative solutions like Mobile Banking, Unified platform, Secured Authentication methods to access entire banking application in single platform.

Moreover in future Banks can expose more APIs and offer products to customer like Term Deposit, Loans, Insurance, Mutual Fund and Pension Products  across customer segments in the unified platform. All Banks will try to provide competitive rates for their products and cross sell them effectively and onboard the customer.