Digital solutions for all
To the person in the street there is a quiet revolution going on in the banking and payments world. Whilst we have seen rapid change over the last 10 years with new payment options and banks emerging offering a full range of services and most times without a bank branch in site - everything possible with a click of your mouse. Well this is about to take a quantum leap where you can look at your banking and payment arrangements, but also see every other offer available to you from a wide range of providers with the introduction of the Payment Services Directive 2 (PSD2 for short).
PSD2 was approved by the European Parliament and European Council in late 2015, and comes into force on 13 January 2018.
In essence, PSD2 opens up a new world as well as helping to create a more integrated, efficient and competitive European payments market, with the key driver of the regulation is to protect consumers by making payments safer, secure and more accessible, through allowing institutions to offer consumers more choice with new innovative products but also allowing them to review their own account, have access to compare and review services from a range of providers and make payments - in current circles known as Open Banking! The new payments initiative has the potential to transform how we view and manage our money, and whilst offering the general public on the street a wide range of offers, perhaps the most far reaching potential is that is may also offer a solution for those who for now have been financially excluded from standard banking arrangements.
In respect to the UK, PSD2 is being implemented through the Payment Services Regulations 2017. PSD2 contains transitional provisions to allow existing authorised payment institutions and e-Money institutions to continue to provide payment services and issue e-money and they will need to re-register or re-authorise their business before 12 July 2018. If these institutions want to carry on providing payment services after this date, they will need to have provided the Financial Conduct Authority (FCA) with monitoring and policy requirements that demonstrate how they safeguard consumers.
Open Banking goes beyond just choice and will provide a range of new services as the regulation will standardise the flow of data and you will have a situation where you can compare the market, as many third parties will begin to offer banking and payment service - sounds familiar, but not before in the banking world. Hang on to your hats! - this new regulation is about to change this with extensive details on your bank and payments services available at a click of the mouse or as you carry your phone, which will continue the transformation of payments being driven by the millennial population. Never before will you have had the chance to see in seconds how you are spending money, help with budgeting, provide payment options, paying bills and you will see this wherever you are in the world.
In many aspects this a quiet revolution that many have asked for years and will further shake up the banking sector through the development of new start-up operations following the likes of the first wave of new banks like Starling and Monzo, being able to offer banking and payments services. Consumers will want to see openness, but also protection of their data so that Open Banking really does create that quantum leap!
Speaking on the introduction of PSD2, Tony Craddock, Director of the Emerging Payments Association commented:
“These excellent regulations do two things: they create a level playing field so that consumers benefit from the latest and best services available, regardless of the size of the company providing them; and secondly, to protect those consumers so their money is safe and secure.”
Kevin McAdam, Director of Prepaid at allpay Limited