PSD2 Week 9 Final Paper

The Second Payment Services Directive (PSD2) is a fundamental piece of payments-related legislation in Europe, which entered into force in January 2016 and will come into full effect by 13 January 2018. It is designed to create a single payment market across the European union, PSD2 aims to make payment faster, safer and more transparent in the new digital economy. PSD2 will give third parties like; payment providers and fintech’s access to customer’s bank data via secure API’S (application program interface) require customer consent to share data, protect against fraud using strong authentication (Paymentsuk.org.uk,2016).

Third party providers (TTP) is the most significant change brought by PSD2, as for the first-time banks will allow third

This will have an impact on the card company’s revenues, as their revenues will start decreasing. In addition, PSD2 will allow third parties to aggregate views of client accounts, meaning faster, additional clear services, access to cash and digital apps, which provides consolidated views of finances and facilitate to manage funds. This means having accounts in multiple banks will be accessible through one digital app rather than through each bank platform. Consequently, PSD2 will not enable banks to discriminate differently to payments initiated exploitation of third party suppliers than the one initiated through their own system. Such access of accounts and payment initiation drives innovation by permitting technology start-ups (fintech’s) to work into a locality that was not on the market earlier. This is because, PSD2 has set the stage for open banking. Open banking is the idea that banks in the UK are going to open all the data they have into the wider world. This means PSD2 lower the barriers for entry to third-party providers and financial

Digital banks such as N26, Fidor and atom bank are giving more control to the customer over personal account data because of PSD2 and open banking initiative. According to the PwC Strategy& study on PSD2 88 percent of consumers use third-party providers for online payments, which indicates that there is a large, primed base of customers for other digital banking services. Moreover, 85 percent of the respondents are happy with companies like Amazon and PayPal controlling money transfers as reliably and securely as their banks. This shows us third party providers has earned consumer’s trust, giving an opportunity to fintech’s to expand due their simplicity (Strategyand.pwc.com, 2017). This is because app based banks simply running off a simple smartphone are becoming increasing present and contributing in removing the old, slow fashioned way of banking due to PSD2 and open banking, as now with just a few taps, friends and family can exchange money, track spending, freeze a card and set budgets. For consumers, this is providing an alternative low-cost access of foreign currency exchange, without the unwanted fees i.e. many big banks do for using ATM’s abroad. In fact, in South, Southeast Asia and China fintech’s are experiencing due to data sharing abilities i.e. new Ali pay and we chat new digital finances are emerging in China, mobile wallet growth in India. This backs the idea that open banking with the use of