With PSD2 implementation nearing, a recent survey by Finextra has explored the ramifications the revised directive will have for different players in the payments industry.
The use of Application Programming Interfaces (APIs) was one of the most talked about themes. They are seen as an exciting prospect that will facilitate the Third Party Providers’ (TPPs) access to consumer accounts, something that the emerging banks are eager to capitalise on.
The bulk of the discussion around PSD2 has been on how it will impact traditional banks and the opportunities it will bring for new entrants to the market. The regulation obliges banks to allow TPPs access to their data, with the aim of creating a more level playing field.
Challenger banks, who are starting with a blank slate, are taking the lead by seizing the fantastic opportunity which PSD2 is presenting them. They are now not only able to compete with the big names, but as some would argue, they already have the head start in this race.
A recent survey revealed that 95 out of 100 banks had as their utmost concern the impact that PSD2 will have on their legacy infrastructure. As legacy systems are currently unable to match the new requirements of PSD2, this could present a barrier to them becoming an ”open API bank”. Traditional banks will have to provide a secure infrastructure for TPPs, establishing a framework for KYC and ensuring anti-money laundering processes are followed.
Some banks appear to be struggling to keep up with the speed at which new regulations are introduced. Despite many benefits, these upgrades represent a great burden for the banks, that will inevitably have to revamp legacy systems, changes that will take years and cost billions.
Although the implementation of PSD2 may cause some difficulties along the way, it’s important to remember that it will bring a range of benefits to the payments ecosystem. Particularly, PSD2 is intended to increase security standards for all those involved in the industry. As PSD2 starts to take shape banks will go through several ordeals, however it will ultimately bring technical benefits, minimise breaches and fraud, and improve the customer experience.
The implementation of such requirements need not be an overly difficult task. Solutions such as that proposed by MYPINPAD for stronger authentication complement the existing infrastructure of banks, working with banks, not against them. Seamless integration with banks’ legacy systems and compliance with PSD2 regulations do not need to be contradictory concepts.