A new directive for payment regulation – PSD2 – was introduced by the EU in October 2017 in response to the increase of the digitalization process in the spaces of e-commerce, e-public, and other services provided in electronic channels, as well as the emergence of new payment services. Can banks benefit from PSD2 or will they have to share their market with other players?
The main objective of the new directive is to legislate a new category of service providers called TPP (Third Party Providers). They are going to be legitimate and have access to the information on the payee account status. The access has been granted so far only for banks and authorized payment institutions. Additionally, new TPPs will be authorized to initiate a payment process debiting the payee’s bank account. This change will give an opportunity for a bank to access the information on the payee account for other competitive banks.
PSD2 is a great opportunity for fintech companies to enter the payment space with their innovative online and mobile payments solutions and offer alternative payment methods to e-business. From the customers’ point of view, the payment process will be easier and more secure due to the additional authorization process that should be applied by payment providers. That is good news, as some authorization processes do not seem secure enough and are in fact a barrier for the payee to adopt digital payments (both for online and mobile transactions).
The diversification of payment service providers might be perceived as a challenge for banks that will have to be more competitive and innovative than TPPs. Banks may win this battle by investing in technology-wise solutions that will convince the users to stay with their bank’s payment service. Banks have a very important advantage over TPPs – they are still recognized as a trusted institution and as many surveys show, the users’ choice for an online payment still goes for bank transfers versus card payment or other payment providers. By adopting the right digital strategy, banks can take advantage of the PSD2 reality and gain new customers and profits.
Considering, the fact that Poland has always been a step ahead with innovative payment solutions and Polish banks are recognized as being very advanced in digital offerings; the PSD2 directive seems more of an opportunity than a threat for banks. Banks investing in technology might benefit from the regulation.
For more information on how we can help banks with adopting and implementing the right tech strategy please visit our webpage – TEAM International.