PSD2 information still scarce as deadline nears
The level of understanding around the implementation of Payment Services Directive II (PSD2) is lacking for both corporates and consumer alike, although they are the parties that are meant to benefit.
Due to be implemented on January 13, 2018, PSD2 will allow third-party providers to access consumer bank accounts and make direct payments, provided they have received the customer’s consent.
The implementation of open API banking platforms will considerably increase the number of payments service providers available to customers, and these will no longer be limited to the banks and credit and debit cards companies. The new regulation has the potential to revolutionize the financial services customers have available to them.
Although the new services are only months away, there is unease about how little education is being provided to consumers about what the changes will mean for them.
One professional working on PSD2 shares concern that the new service could be sensationalized when launched, and tells Euromoney: “We don’t want customers reading headlines about third parties having access to their data and bank account details before they actually understand what the benefits are to them.”
Consumers may well be looking for greater choice in their payments options. A study of US and European consumers by ACI Worldwide questioned them on their perceptions of banking. A quarter of respondents in the UK, US and France stated they wanted greater control over their payments services, such as being able to set their own contactless payments limits or to temporarily deactivate their cards.
However, ACI Worldwide also found that when questioned directly about the prospect of PSD2, 55% of UK consumers would need to have more information on what would happen to their personal data and how it would be protected before they would consider using the services.
But this information does not seem to be forthcoming. There is debate about which party in the process – the banks, the third parties or the regulator – is best placed to provide the consumer with details before misinformation can dissipate. Lu Zurawski, solutions practice lead EMEA, retail banking and consumer payments at ACI Worldwide, says: “There needs to be an enhanced method of educating consumers, as there is a risk that it could be perceived as a potential security threat, rather than promoting the possibilities.
“There is really nothing for banks to fear from the arrival of open API.”
To date, no one party seems willing to come forward and take on the role of educator. Commenting on the potential for the banks to step up here, the PSD2 professional told Euromoney banks may be dragging their feet as they do not want the third parties to have access. Should a consumer choose to use a third party for a payment, the bank will lose the overview on the details of the transaction, reducing the quality of its data, and also lose out on any possible fees applied to the payment.
Dick Oskam, global head of sales, transaction services, at ING, says it will only be damaging for them if banks bury their heads in the sand: “Education about what the changes of PSD2 mean is important, in particular for the consumer. Consumers needs to understand the benefits of it if they are to allow their data to be shared. Banks can and should play a role in this.”
There needs to be an enhanced method of educating consumers, as there is a risk that it could be perceived as a potential security threat, rather than promoting the possibilities - Lu Zurawski
Instead of being overly concerned, Matthew Davies, head of GTS EMEA at Bank of America Merrill Lynch, says the banks should view this as an opportunity: “PSD2 will create a new dynamic, but the benefit is not only with the third-party providers as it can also be a catalyst for banks to develop new products.”
Oskam says banks that are slow to move will only end up hurting themselves in the long term: “The business model for banks will shift with the introduction of open banking, that’s what banks are preparing themselves for. Banks will have to think about how they work in different digital ecosystems and how they compete or co-operate with other banks and fintechs.”
More widely, the slow trickle of information potentially risks the new third parties not understanding what they will be able to do. Davies says: “There is still some confusion by corporates about the changes PSD2 can initiate. They are aware of the impending regulation, but they are not certain of its potential.”