What is “PSD2”?

On May 6th the European Parliament and Council of Ministers reached a political consensus on the new EU Payment Services Directive (PSD2). The first plans were discussed as early in 2013 and for many tech-companies the consensus has been awaited.

What is the fuss all about?

Until now, banks have been able to deny payment-service-providers (PSP) access their clients’ accounts, even if the client has approved the PSP access. Looking at it from an initial security perspective, this seems to make sense. However, it causes problems, as new PSPs are experiencing difficulties while entering the market. When new players are having a hard with their market entry, there is little room for innovation. Instead, the payment market has been stuck with non-customer friendly payment services that are rigid to implement as a company, and difficult to use as an end-customer.

There are some PSPs that have been able to find a solution to this. One of these is the Swedish company Trustly that works as a layer on top of the banks. The company contracts with banks and can then offer end-customers to use their online payment service. The end-customer uses the bank’s security protocol, but in a more customer-friendly way that benefits everyone involved in a purchase. Until now, it has been difficult to grow for companies such as Trustly as the banks have had no obligations to contract with them.

So what will the PSD2 actually mean?

The number of ways how to manage payments online has been growing over the last years. New innovative companies have struggled to come up with solutions on how to facilitate businesses’ online payments. Due to regulations, the number of innovative products is not what it could have been.

The PSD2 will oblige banks to allow PSPs to access their clients’ accounts. To assure security, every PSP will have to be authorized and registered to get any access at all. This will open the market to more players, which will foster competition and innovation while maintaining security for the end-customer.

Looking into a bright future

In more concrete terms for you as a business owner, there are more innovative payment solutions to be expected in the years to come. These will facilitate how you are managing your payments to your suppliers, or from your customers.

We at Advanon are happy to hear that the regulatory side is starting to move forward, in order to keep up with the disruption that is going on in the financial service industry. We have our hopes up that this will make a change for the better on how we transfer money in the not so distant future.

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Katharina Boehringer