PSD2 – A new era in ecommerce banking

By Dr. Rachel Gauci, Senior Legal Counsel at Credorax.


The implementation of PSD2 is expected to revolutionize payments and banking infrastructure for consumers. This is a sea change for open banking and a new era in the way money is moved — opening up payment infrastructure for banks and linking third-party partners.

The Payment Service Directive 2 offers better choices for information services and payments for banking consumers. Now, banks are required to provide payment services providers (PSPs) and others a connection to access bank customers’ account data and to initiate payments.

Wider Transparency

From a merchant acquiring bank’s perspective, it is exciting to see all the new opportunities that PSD2 will bring about for fair competition, transparency, and the breaking down of entry barriers for new payment services.

European banking customers will now have the power to give third-party providers permission to retrieve their account data from their banks.

PSD2 makes the role of the merchant acquiring bank even more important than ever because now there will be an even stronger need for security and expertise. Knowing how the global payment services market works allows leverage of the benefits PSD2 brings to the payments landscape. There is going to be a greater need in understanding the intricacies of helping merchants and retailers connect directly to the consumer bank account to initiate payment. There will be a need to safeguard consumers from any bad e-commerce experiences, including fraud.

Technology for an Improved Experience

Retailers and e-commerce merchants as well as other third-party providers will look to bank with merchant acquirers and e-commerce fintechs to help them achieve an improved payment experience. This partnership will help to leverage the power of connecting with banking open application program interfaces (APIs) without the need to maintain anything else such as any other backend systems from the bank.

Through the utilization of banks’ APIs, non-banks can enter the financial market without the heavy compliance and infrastructure that banks are required to maintain. This ignites innovation in the financial market and brings fresh ideas about how to shape the banking experience.

However, technology-savvy merchant acquiring banks are going to give e-commerce merchants a boost by enabling them to quickly deploy their go-to-market strategy and ultimately generate more revenues without the pitfalls. They will be able to guide them, bringing them within the scope of PSD2 compliance. They will also be able to provide them with onboarding gateways and beneficial applications to deliver a consolidated view across different types of accounts in a secure and safe way, resulting in better customer insight. This is why it will be important to partner with the right fintechs that have the knowledge, technology and services to do all of this.

Ultimately it will be critical for PSPs and online merchants to use payments technology to their advantage and optimize operational procedures in a safe and secure way without losing customers to shopping cart abandonment or have consumers frustrated and not completing their online purchase. PSD2 requires stronger identity checks of users when they are paying online. Fintechs that build artificial intelligence (AI) into their e-commerce business will provide better consumer protection against fraud.

The Outlook

In conclusion, PSD2 empowers bank customers, giving them the option to use third-party providers to manage their finances. It wouldn’t be out of the question to use Facebook or Google to pay bills, make P2P transfers and even analyse spending, all while the money is being safely placed in a bank account.

The newcomer tech companies and even well-known big-tech can be risky because they are not yet savvy to the payment market, and need to be aware of privacy and related issues. Only tech-savvy banks are uniquely positioned to launch revolutionary services, mitigating risk. Not only are they able to provide a breadth of services to customers of the post-PSD2 services, they are also able to support market newcomers via partnerships.

Consequently, It is expected that third parties will build financial services on top of banks’ data and infrastructure but they will need tech savvy acquiring banks to help get them there. The winning strategy is to choose an acquiring bank that has the know-how to reinforce consumer protection, improve the security of internet payments and account access within the EU and globally. Seek out and partner with such an acquiring bank to get up and running fast. There will be a race to gain market-share and the customers that will, in the end, create their own collection of smaller service providers, instead of choosing one specific bank for all financial needs, will be the most successful.

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