Banks faced with PSD2: around payments and beyond, digital wallets and new services

Oct 15, 2014

New usages, new technologies, new regulations, new business models and new players: developments are accelerating and interacting. They are profoundly changing the world of financial services, in particular that of payments.

Regulatory changes have significantly helped to transform the payment landscape. Several European regulations (Payment Services Directives and related regulations) have been adopted with the aim of establishing and adapting over time the necessary legal framework for the implementation of a single, open, secure and innovative European market in payment services.

But by creating new types of status, the regulations have favoured the emergence of non-banking players on the payment market. Combined with changing consumer needs and technologies, they have therefore called into question existing balances.

Who therefore are these new entrants and what is their field of activity?

With the Payment Services Directive (PSD) and the second Electronic Money Directive (EMD2), the provision of payment services no longer falls under the scope of the banking monopoly. Such services can now be offered by new entrants having payment institution or electronic money institution status. These players form, together with credit institutions, the group of Payment Service Providers (PSP) authorised to offer payment services, including credit transfers, direct debits, card payments and money transfers.

As soon as the second Payment Services Directive (PSD2) enters into force, payment initiation services will be added to these services. The Third Party Providers offering such services will have to be authorised as payment institutions and banks will then be obliged to allow them access to bank accounts to initiate payments.

In the future, two different types of PSPs will co-exist: account servicing payment service providers (AS-PSP) and third party payment service providers (TP-PSP) which will be able to initiate payments from accounts that they do not manage.

What do this new regulatory provisions involve? What challenges do they entail for banks? How can banks reduce the impact and make the most of the new situation?

Those are the subjects addressed via the views developed in this report, which relies on the discussions of the Think-Tank which we coordinated with French banks for Efma between April and June this year.

We have chosen in this document to focus on expressing points of view rather than presenting figures, as the latter – above all when they are forward-looking – are controversial in a domain which is not yet mature. In addition, in this document, we have taken into account the latest changes made to the text of the directive during the summer of 2014.

The points of view expressed in this document are those of Sopra Banking Software. They are based on the discussion of the Think-Tank but do not necessarily refl ect the convictions of all its members.

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