The PSD2 is a Directive for Payment Services in the EU, which aims to introduce more openness, transparency, and innovation into Payment Institutions. This new legislation brings major transformations to the banking sector allowing any entity to have access to a payment or a demand deposit account as long as its authorized by the account holder, without any intermediation from the banks.
Under the PSD2, banks must allow access to their payment services to other companies, known as Third Party Providers (TPPs) for payment services. After being given permission by the account holder, TPPs will be able to submit payment orders and to transfer funds on behalf of their clients.
In the future banks will no longer be allowed to charge payment initiation services, meaning a set of revenue sources for the banks will disappear. Also, clients will be able to perform most of their financial transactions through an intermediary, thus creating immense challenges for banks maintain close relationships with their clients. Under this directive will benefit from the increase in competition and from innovative and more specialized services. PSD2 also aims to create consistency between payment forms such as online and mobile payments.
This results in potential new sources of revenue by allowing banks to charge a service fee for these services, creating a whole new income stream. In both cases (PIS and AIS), client consent is mandatory, as well as prior certification both by individuals and organizations providing such services.
In practice, some delay in the emergence and spread of TPP is to be expected. This is due to a set of regulatory systems, either accessory or in direct connection, such as the RTS (Regulatory Technical Standards), which came into effect at the end of 2018.
PSD2 main key-changes:
Definition of information systems strategy and service architecture
SW accelerator for the control, disclosure, and management of APIs and access
A reduction in time-to-market for PSD2 initiatives
Core systems integration
Full process cycle management; from APIs publication to FinTech connection and client use