PSD2 went live across Europe on January 13th 2018, signalling profound changes in retail banking industry.
The directive heralded a new era of banking for consumers, making it easier for people to change their bank accounts and make more personalised arrangements with banks concerning individual finances.
The directive and the UK Open Banking initiative will allow third party companies to operate financial services on behalf of consumers, with the co-operation of existing banks.
“Ever-rising fraud levels are linked to the consumer preference of mobile e-commerce, forcing regulation to keep pace with innovation. Businesses have had an extended period of six months, in addition to the two years since the initial announcement, and there is no legitimate reason not to be compliant.
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“A failure to integrate Strong Customer Authentication demonstrates a disregard for consumer protection – it should have been prioritised long ago and viewed as a business differentiator.”
Lu Zurawski, consumer payments practice lead at ACI Worldwide, said: “Third party companies will be able to access account information and to perform transactions on behalf of consumers, obviously only with explicit permission from the account holder.
“We will see new providers offering so-called ‘account aggregation’ services. Those of us with multiple bank accounts will be able to access all of our private financial information in one place, without the need to log into separate applications.
“These providers are also expected to offer comparison services, showing fees, charges and features of different products. If consumers adopt these new services, our relationship with banks will eventually change.”
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Some have argued that the revolutionary piece of regulation will spell an end to the high street bank, while others have suggested that there is nothing to stop traditional banks becoming account aggregators themselves.
Impact on the UK
“The UK is ahead of the pack already, via its Open Banking Initiative and the cluster of fintech start-ups based in London,” says Michael McKee, partner at DLA Piper. “Non-banks now have a real opportunity to break into the market, offering payment and account services, independent of traditional banks – with the same banks required now by law to assist in the process.
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“How quickly this revolution catches on will of course depend on the customer. But given the falling numbers visiting high street branches and increasing volumes of transactions occurring online or via smartphones, the slice of the pie up for grabs to new banking providers is significant.”
PSD2 will inevitably bring change that will benefit consumers, but this can’t be expected to happen imminently. Rather, the implementation date will mark the beginning of incremental change.
Nick England, CEO of VFX Financial PLC, says that the “PSD2 is a significant watershed moment in the retail banking space. It marks the evolution of technology and signals the beginning of a new, more competitive landscape which will benefit consumers. However, a revolution doesn’t happen overnight. Yes, consumers should come to expect a better service from their banks, but changes as fundamental as these take time.”
“Instead, we should look to today as the start of incremental change. We should actually look to the next year, when we can expect to see banks integrating FinTech providers and forming strategic alliances, and even further ahead when we’ll see new services coming to market in the next 2 – 3 years.”
“PSD2 is the banking equivalent of the Pioneer movement to the West – it will take time, but once changes are made, it will create a whole new banking environment.”