What is the second Payment Services Directive (PSD2)?
And why it matters to consumers
What is PSD2?
PSD2 is the second Payment Services Directive, designed by the European Union. This directive could revolutionise the way you make online payments. The new EU directive will allow companies to give their customer the option of using third-party providers to manage their finances. Soon, you may be able to use services like Google, Amazon, or Facebook to pay your bills, make transfers and track your spending.
Consumers and businesses will experience faster payments, improved consumer protection and a wider choice of payment services.
The main goals of PSD2
- Increase consumer choice and reduce costs through the use of payment services
- Facilitate increased competition for banks by the introduction of third parties
- Ensure innovation, integration and harmonisation
The payment industry will need to invest a lot of resources to adapt to the new requirements. This is a challenge and an opportunity for the banking industry and FinTech companies. Your money will stay safe in your current bank account. However, third-parties will give you the option to skip the middleman and avoid bank fees.
According to Bits AS, it is believed that banks, FinTech companies and payment institutions will establish themselves in these roles to access the account. The PSD2 project will consider access for the following roles:
- Payment Initiation Service Provider (PISP)
A service to initiate a payment order at the request of the payment service user with respect to a payment account held at another payment service provider.
- Account Information Service Provider (AISP)
An online service to provide consolidated information on one or more payment accounts held by the payment service user with either another payment service provider or with more than one payment service provider.
Why does it matter?
This matters now because the first PSD was initiated in 2015, and now with the updated PSD2, the EU has until 2018 to implement it. Ultimately, PSD2 will break the bank’s monopoly on their user’s data. It will allow third-parties like iTunes, Twitter or Zalando, to retrieve your account information and payments directly from your bank account(s) – with your permission, of course. As a consumer, this means that you will no longer need to use a credit card company to transfer money from your account to the seller; which will save you money. It will be interesting to see the new services that will emerge after PSD2 and how it will give you as a consumer added value.