How can PSD2 help you? The answer depends on whether you are just a consumer (because we’re all consumers) or if you’re also a business looking to offer your clients some sort of financial service. There are advantages for everyone, although each group will take more advantage of some functions depending on their characteristics.
Boosting competitiveness thanks to PSD2
One of the main goals of the new EU directive on payments (PSD2), which went into force this past January although it won’t be fully implemented for a few months now, was to increase competitiveness in the financial sector. Not only to promote new start-ups (mostly new FinTech companies) that bring value added to consumers in a conventional (and often out-dated) sector like finance, but also for those consumers to have a wider range of options to choose from, without which their normal bank would end up being basically their only choice.
Although many companies considered FinTechs (providing financial services using technology) were already offering their clients high value added financial services, having the regulatory framework that establishes the same rules and limits throughout the SEPA territory (the European countries that joined the previous directive on payments, PSD1), gives clients peace of mind and does, in fact, promote competition.
PSD2: Consumers, at the centre!
We’ve already said that legislators had consumers in mind when creating PSD2. To start off, for the first time it truly gives them ownership of their banking details. Based on that recognition, the directive puts the decision to transfer their data to third parties in clients’ hands. This forces the banks that previously had exclusive access to share this information, when asked to do so. The third party is what the directive calls third party payment service providers (TPP), which can register as account information service providers (AISPs) or payment initiation service providers (PISPs).
PSD2 also regulates how these details can be made available to TPPs and, above all, strives to increase transparency and security, so that a well-intentioned measure doesn’t end up causing more problems than it solves.
PSD2 enhances shared data and security
An advance like PSD2 would be counterproductive if it didn’t cover the key topic of security in transactions. That’s why the directive also heightens security in various areas: making sure data is kept safe but also that companies can be sure that the user trying to access their services is who they say they are. Meaning it also helps prevent fraud. This way, companies can use or incorporate these services (an SME can apply for a line of credit from a FinTech, an e-commerce site can manage its customers’ payments with an API, etc.) with every guarantee. And the end consumer will know that there is no additional risk in transferring their data and trusting third-party companies.
Stronger authentication and fraud prevention with PSD2
PSD2 includes (although it hasn’t yet been implemented in all countries) strong customer authentication (SCA). What is this? It adds further methods clients must use to identify themselves before gaining access to financial services. It is no longer enough to use just one type of identification (a PIN, for example), they must use at least two out of the possible three. These can be the standard PIN (which is something the person knows), plus something that is part of them (a biometric coordinate, like an iris scan or fingerprint) or something they own (like an electronic device).
Plus, if you’re one of the companies that uses our marketplace of APIs for financial services, at Unnax we have made sure our tools are prepared to give you information on your clients, verified in real time. This way, you can make secure, informed decisions. Another advantage you’ll have is the opportunity to take advantage of your clients’ information to offer them services personalised to their financial behaviour and interests. Ready to take advantage of the benefits of PSD2?