Europe’s banks prepped for PSD2 rollout
(10 January 2018 – Europe) Many European banks have opened access to third parties including retailers, technology groups and rival lenders — to the accounts of any customers who authorise it.
The changes are expected to be the biggest shift in retail banking in around half a century.
The changes are part of the European Union’s second payment services directive (PSD2), which comes into force across most of the continent, opening the door for tech-savvy rivals to pounce into the sector.
In addition to opening up access to customers’ banking data and financial habits, the new regulation will also allow other companies to initiate payments directly from customers’ accounts.
“This is the biggest regulatory change in my career from a scale perspective — it is a very significant technical lift — as it puts customers in control of their data,” says Catherine McGrath, a managing director at Barclays.
Meanwhile, financial service providers in the UK received an early start in offering “open banking” rules after the Financial Conduct Authority (FCA) saw it a way to improve competition in retail banking by forcing the nine biggest British lenders to open up their data.
Eight of the nine UK banks will be in varying states of readiness by the end of the six-week launch period, before which new services will be trialed only by staff of banks and third parties.
The FCA will need to authorise third-party companies who want to access customer data, and of the 40 that have already applied, 12 are expected to be granted those permissions.
Christoph Rieche, founder of online lender Iwoca, said competition within small business lending will be transformed as fintechs gain better access to much of the same data that banks have, allowing them to “compete head-on with banks on more of a level playing field”.
Some European countries, such as Belgium, the Netherlands and Poland, will not transpose PSD2 into law for months, with most banks having until 2019 to comply.
Speaking of the changes, EU commission vice president responsible for the plans, Valdis Dombrovskis said, “Gone are the fees that consumers have to stomach just to use credit cards online and in shops, saving them €500 million a year.”
Major banks such as Norway’s DNB with Vipps, and ING with Payconiq in Belgium, have acted on the expected shift in payments from debit and credit card networks to the new direct account access model by creating their own free direct-access apps.
“Not a lot of parties will be ready on Saturday — it will be a gradual implementation over the next 18 months,” says Eric Tak, the global head of the payments centre at ING.
“How well banks deliver new services to their customers in that time will be a huge factor in deciding how much they are disintermediated.”