Banks face a stark choice of accepting the new payments world passively – or proactively developing additional services to retain customers. Do you know how your bank will handle PSD2?

As a new consultation on guidelines for compliance with PSD2 are issued, banks face a stark choice of accepting the new payments world passively – or proactively developing additional services to retain customers. Do you know how your bank will handle PSD2?

Consultation on guidelines for PSPs

Preparations for the implementation of the EU's revised Directive on Payment Services (PSD2) are continuing and the European Banking Authority (EBA) last week published a consultation on draft guidelines on how payment and e-money institutions should apply to gain authorisation and meet requirements under PSD2. This effectively also sets the minimum conditions that must be met to secure an authorisation and could be the basis of ongoing compliance under PSD2 in future – so it's of interest not just to aspiring payment service providers but also the current ones. It reminds us of the fact that things are about to change significantly for financial payment institutions when PSD2 becomes law by 13 January 2018.

Changes to come

A report by Accenture spells out some of the ways in which the UK's payments landscape will change from 2018.

PSD2 is threatening the relationship banks have with their customers because one of its core requirements is for banks to grant third party providers (TPPs) access to a customer’s online account/payment services in a regulated and secure way – known as ‘Access to Account’ (XS2A). XS2A enables application programme interfaces (APIs) to gain access to customer accounts and data (provided the account holder provides consent). Under the new PSD2 rules, Payment Initiation Service Providers (PISPs) will be able to initiate third party payments initiation and Account Information Service Providers or (AISPs) will be able to have third party account access.

Banks could lose out on 'customer ownership'

The two graphics below, from the Accenture report, show how PISPs and AISPs will change existing interaction models between customers and banks.

Losing fees

But the impact of XS2A is that banks will start to lose out on fees from card-based transactions, which has already come under pressure from the Interchange Fee regulation. Accenture's report notes that: “It remains to be seen how much the customer experience for PISP transactions will differ from that for existing card-based payments – but, in estimating the potential uptake of PISP services, it’s clear that the merchant will be key.”

Decision time for banks

The report also states that European banks now face a decision of whether to become a banking ‘utility’, or to continue to play a central role at the heart of their customer’s daily lives. Accenture sets out four primary strategic options for banks in order to respond effectively to the threats and opportunities of PSD2, which are represented in the graphic below.

These four options in effect represent just two different paths for banks: either accept PSD2 passively, remaining as you are (and risk losing 'customer ownership') or accept PSD2 proactively and expand the bank's payment services to offer advice, API platforms and become more integrated in client's everyday life.

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CTMfile take: Corporates are right to be very curious about how their banks are approaching PSD2 – this is a conversation you should be having with your bankers.