How will PSD2 affect the current payments and banking world?
Last week we looked at the changes the new Payment Services Directive (PSD2) will bring forward when it becomes EU law. Today we look at the debates and questions surrounding the new directive.
A popular view is that PSD2 is “so disruptive” that not only banks will face strong competition, but also “the whole business model of retail banks” will most probably be impacted. Competition in the finance industry will no longer be between different banks, but “everyone offering financial services”.
It is important to note, however, that the aim of PSD2 is more than just to allow competition and open the door to new technology. By recognising and legitimising new financial services companies, the EU will be able to monitor and regulate their actions so that consumers’ data is secure and safe from fraud. Similarly with the original PSD, the Financial Conduct Authority (FCA) will be monitoring compliance and enforcement as the UK’s competent authority.
Payments UK have advised what provisions and assessments Payment Service Providers (PSPs) need to consider in order to prepare for the implementation.
Undoubtedly, some may wonder what will happen to this directive when the UK leaves the EU, especially now that Article 50 has been triggered. The EU “divorce” process will take at least 2 years and the PSD2 will be enforced before the UK’s exit. Payments UK reassured the industry that most UK financial regulation is already derived from EU legislation and PSD2, along with any other incoming regulation, will remain applicable until any changes are made. That will be a matter for Government and Parliament to resolve in due time. European Banking Authority (EBA) chairperson, Andrea Enria, also added to the conversation by pointing out that the UK is legally bound by the PSD2 and that the UK is a key contributor to the directive. Payments UK further reassured the UK industry by claiming that “there is general agreement in the industry that any changes should not diminish the levels of service and protections that UK customers currently enjoy”.