PSD2: The road towards Open Banking?

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A vital piece of banking legislation is being rolled out in Europe, but the vast majority of consumers don’t know anything about it. According to legislators, the second Payment Services Directive (PSD2) will make electronic transactions cheaper, more efficient, transparent and secure.

PSD2 will also loosen the banks’ tight grip on customer data, enabling third party companies to offer financial products to consumers. So will it usher a new period of “open banking”?

WikiTribune wants to cover PSD2. What does it mean? How will it work? What are advantages and disadvantages? Who do you think we should talk to? What other approaches/angles are worth investigating?

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Key to the EU’s Digital Single Market priority, PSD2 applied from January 13, 2018, but implementation is ongoing. It sets out security requirements for electronic payments and customer data, in line with the requirements of the EU regulation on data protection (GDPR), expands the role of the European Banking Authority, and aims to increase consumer rights.

It is accompanied by another piece of legislation, which caps transaction fees for card payments. Deloitte estimates that payments services account for almost a quarter of retail-banking revenue for European banks, or €128bn ($151bn) in 2015. Strategy&, a unit of the consultancy PwC, found (The Economist) that 68 percent of banks think that PDS2 will leave them in a weaker position.

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Under PSD2, banks have to share their customers’ data with third parties on a dedicated Application Programming Interface (API). This has been hailed as the first step in a “slow-burn revolution” which will challenge banks’ dominance by helping third parties offer competitive financial products.

Missed deadlines

Some of the UK’s biggest current account providers HSBC, RBS, Santander, Barclays, and the Bank of Ireland announced in December that they wouldn’t meet the January deadline. Nationwide followed their lead in January. The Competition and Markets Authority granted them extensions ranging from weeks to a year.

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Most media have paid little attention to the issue, and only four months before the regulation came into force, the UK’s independent Consumer’s Association found that 92 percent of UK consumers were completely unaware of it.

In August 2016, when guidelines for PSD2’s implementation in Britain were released, the Guardian was wondering whether finance’s “Uber moment” was on the horizon. The day the law came into effect, the newspaper’s columnist Patrick Collins declared “Open Banking? I think I’ll keep my door shut,” referencing a negative report by NatWest.

We plan to talk to: 

  • Open Banking Ltd: The implementation entity created by the UK Markets and Competition Authority
    • Imran Gulamhuseinwala: Implementation Trustee
    • Alan Ainsworth: Head of Policy
  • Jason Bates: Founder of Monzo, a digital bank, and 11:FS, a digital banking consultancy.
  • Tink: A Swedish startup whose app lets consumers manage their finances across banks and accounts. A few European banks, the biggest one being Belgian BNP Paribas, have made deals to incorporate Tink’s technology in their mobile banking apps.
  • Banks: HSBC, RBS, NatWest, CYBG group
  • Software developers

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