These are interesting times for payments and corporates need to keep up, not just with what their customers are expecting, but also in terms of what they should expect from their own banking partners.
PSD2 is set to change the payments industry in two key ways. The final draft of requirements for customer payments authentication is due in just under four months – known as the 'Strong Customer Authentication and Secure Communication' (SCA). Also, PSD2 will introduce the Access-to-Account (XS2A) rule, which will mean that banks will have to allow access to account information by third parties, through application programming interfaces (APIs). Both of these rules could have important ramifications for interactions between companies, their banks and their customers.
Could SCA be a problem for retailers?
SCA is one of the main changes effected by PSD2. When the final draft is released in January 2017, it will stipulate direct customer authentication requirements and common communication standards. This will mean standard authentication requirements will apply to both online and card payments. Some suggest that this could complicate the customer experience and add more “friction” to card payments. Tom Hay, of Icon Solutions, writes that: “This will level the playing field, potentially introducing further friction into the card journey.” Seeing as retailers are currently trying to solve the problem of abandoned shopping carts, they will not welcome another level of required customer authentication.
APIs: can bank-customer relationships survive?
The introduction of APIs and the obligation of banks to allow account data to be used by third parties in effect opens up the banking market to increased competition and allows non-bank payments service providers (such as fintech start-ups or services run by the likes of Apple and Google) to compete for customer services with the traditional banking sector. In short, banks face the risk of losing control of their customer interfaces.
However, Christoffer Hernæs, of SpareBank, points out that there are also opportunities for banks. In his blog post on Finextra, he says that banks could choose to 'join the game' and start offering aggregated bank account data to their customers as an 'account information service provider' (AISP). He argues that banks will have an opportunity to “become an identity broker and “financial life coach” centred around customers everyday finances”. He suggests that banks could also become 'payment initiation service providers' (PISPs), which means they could develop and offer applications for P2P online payments. Hernæs writes: “This option could provide new revenue streams in a changing payment landscape but banks will need to compete directly with established players in the already crowded online payments landscape.”
CTMfile take: PSD2 is something that corporate treasurers should be learning about now: significant changes in how we interact with both banks and customers are on the horizon.
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