For corporates seeking to capitalise on the second Payments Service Directive (PSD2), access to accounts will mean more choice as to how they make payments, clear opportunities for cost reductions, the potential to access better information flows, and generally more user-friendly experiences.
Yet this is only stage one. Once access to accounts under PSD2 has bedded in, the payments market will take further steps towards Open Banking, and again, corporates will benefit from the emerging innovation ecosystem offering them many new services.
How does PSD2 impact corporates?
Among these market actors, the new ecosystem that is emerging stands to benefit corporates the most. What’s more, unlike banks, corporates will not have to undergo any sizable structural change in order to unlock these benefits.
A corporate involved in e-commerce or the internet of things could, for example, introduce a payment initiation service enabled by PSD2, offering push payments, into its business model. Push payments have a number of advantages over existing methods of collection, potentially reducing the cost of payment instruments (cards or e-money), reducing the risk for returned direct debits, and where instant payments are being offered online via SEPA Instant Credit Transfer (SCT Inst), probably speed up the finality of settlement. Because using strong (two factor) customer authentication is mandatory, these payments are also expected to significantly lower levels of fraud and unauthorised payments.
In addition, by opting to receive newly introduced TPP account information services, corporates may work with better and more actionable information, for example, real-time balances on their various accounts with different banks, enabling more proactive liquidity management.
These new services may in turn be used to provide corporates’ customers –consumers or businesses – more convenient ways to pay and useful information. Account information services could for example be utilised to conduct online credit assessments of retail customers at the point of sale, for benchmarking or for advice on recurring payments. And, in making such services available to customers, corporates may (with consent) gain online access to customer account information.
Of course, new services under PSD2 are not applicable to all corporates and all should critically assess the appropriateness depending on their individual situation and needs.
Capitalising on TTP services
Deutsche Bank’s push payments pilot solution – to go live with the International Air Transport Association (IATA) – exemplifies how corporates can adapt their payment models to prosper from TPP services.
The solution, for internet-based ticket sales, permits Deutsche Bank to collect ticket payments directly from customer accounts – thus removing the need for credit and debit transfers to the airline. Facilitated by SCT Inst, these payments are received in near real-time, unlocking substantial working capital benefits for IATA and the airlines it serves. What’s more, this solution serves to remove the associated credit card fees, which for the airline, could equate to billions of dollars. In this respect, push payments have a clear advantage over traditional collection instruments.
Without sufficient standardisation, however, payment service provision under PSD2 is likely to be fragmented, lacking interoperability and scale. This would mean the market would lack sufficient critical mass for TPPs to start providing additional exciting services to customers, and treasurers would lose out.
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