The Payment Services Directive 2; good for some and possibly, bad for others. This initiative is going to make big waves across all sectors.
So what is PSD2? Essentially, it’s a fundamental shift in the way we access our bank information and how payments are pushed from one place to another.
It does this by establishing an electronic payment link between the payer and the merchant. The directive provides customers with online consolidated information, allowing them to see spending patterns, financial needs, expenses etc.
Importantly, it’s the answer for retailers demanding alternatives to card networks. The Directive will allow retailers to ‘ask’ consumers for permission to use your bank details. Once you give permission, the retailer will be able to ‘push’ the payment directly from your bank with no intermediaries. This undoubtedly will result in decreased revenue streams for banks and card companies.
However, the impact that PSD2 and open banking will have is much bigger than initiating payments from a bank account. It’s more than cutting card transaction fees.
We recently attended the Open Banking/PSD2 summit at Level39 and the insight we gained can be summed up in 4 key points:
- Opening up APIs and implementing PSD2 should not be viewed as an experiment
- Customer connectivity is imperative
- A new mind set shift is needed on how to deliver new value to customers
- Start-up banks are API through and through. Older banks need to stop resisting and embrace
So what does this mean for the future? It’s sure we’ll start to see banks and fintech startups working together to provide better services to consumers, despite the banks directly competing with them.
New business models will be formed, new services will be offered, banks will provide a marketplace for developers to build on top of; new value will be created. One thing we are sure of: there will be a mindset shift in financial services.
However, it’s not only fin-techs and banks that will see change from the new PSD2 initiative. Merchant apps, corporate/SME portals, insurance brokers, estate agents, accountancy firms and more, will all find use cases from this new open access.
What’s clear is this will be a huge opportunity, and where there is opportunity, there is innovation.
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