It’s now less than six months until the Payment Services Directive 2 will come into effect. With national legislation in each of the 28 countries currently in the European Union due by January 13, many banks and financial institutions are currently preparing how to be compliant. For teams preparing for PSD2, there’s a determination to get changes made and infrastructure in place, as well as a sense of trepidation at how the wider market will evolve.
For many banking IT teams, PSD2 represents a challenge and an opportunity. The challenge will come from other banks and fintech suppliers being able to get access to valuable data that was previously held by banks alone. However, the opportunity can be found in preparing for the future. For teams that have gone through mergers, acquisitions and new service launches, the resultant spread of customer data leads to varying quality and inconsistency across different silos of IT infrastructure. This has been a perennial problem for years.
Sourcing budget and support to deal with this spread of customer data has been difficult in the past. After all, what is the ROI on fixing something that already works effectively? However, these silos do have an impact on customer experience. PSD2 effectively forces those banks that have not brought customer data together to do so.
How to build PSD2 compliance and support for APIs alongside traditional banking apps
At its heart, PSD2 shifts the model for processing payments from one based on merchant acquirers and payment processors over to one that uses application programming interfaces (APIs) to directly connect banks, retailers and customers. By putting a secure framework in place, retailers can be paid faster and customers can have greater control over their money.
At least, that is the theory. Alongside this, there is now room for new market entrants to disrupt the payments market through using data in innovative ways. By meeting customer needs more efficiently using data, Account Information Service Providers (AISPs) and Payment Initiation Service Providers (PISPs) can insert themselves into the value chain. For banks, AISPs represent a potential threat to their existing relationships with customers.
