With the upcoming implementation of the Payment Service Directive 2 (PSD2) we will see a tremendous change in the banking and online payment world.
PSD 2 is the answer of the regulator to the recent technological development. It will mean further harmonization of the financial systems and also a paradigm shift in terms of data ownership. It will introduce so called Payment Initiation Service Providers (PISPs), which is basically a service we already know from companies like Sofort and Trustly. However these services now get officially recognized and for the first time properly regulated. All banks will need to provide 1 API through which all of these PISPs can access the accounts of the customers. For sure this will reduce the developing and operation costs of the PISPs by far, enhance consumer trust due to regulation and also mean more competition.
The competitive advantage which the large providers like Sofort have nowadays will melt like ice in the sun since there will be only one connection to all banks in the EU necessary.
In terms of loan and credit and credit card applications PSD 2 will also become a game changer. With the introduction of Account Information Service Provider (AISPs) the bank customers can share their data (like bank statements) with all registered AISPs. This means that applications for credit, or car loans, etc. become much easier. One example: If I want a car loan from a bank with which I have no account yet I will have to provide statements, payslips and further documentation in order to get an offer. Banks want to see my record prior to giving me a loan. However with PSD 2 I can give these Banks access to my records through the AISPs and they can see within the blink of an eye if I am in debt or not, what kind of credit line I have with my house bank and what income I have. Not only this, but I can share all of my data of all my bank accounts inside EU (also savings accounts) with this third party. And they can of course be located in all EU countries (France, Spain, Germany, Poland, Greece,etc.).
This means much more competition and cross border finance business.
Therefore it is likely that PSD 2 will make the finance industry in the EU more competitive. This means that non EU countries that compete with EU will have to harmonize their systems or suffer a competitive disadvantage. This will also impact nearby countries like Switzerland.
So who is the winner ?
– The overall winner will be 1) the customer. Customers will have a larger choice and easier ways to contract and exchange with their providers. This will also lead to better prices for consumers. 2) Those wise companies and FinTechs which will use the change in their advantage will also win as they can increase their potential customer base across the entire EU and also have easier access to the data they need for their sound decision making.
We are about to see the unification of the EU finance market and this is a big step for the unification of our continent and also financial harmonization between the 28 EU member states. However not all banks have yet started positioning themselves to the new rules of the market. Hopefully those late adopters will move quickly, before the PS PSD will be fully implemented by end of 2018 or beginning of 2019.
The article written by Daniel Wicharz.