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FI’s unaware of customer account access obligations under PSD2

FI’s unaware of customer account access obligations under PSD2

Only 5% of banks and other financial institutions are aware that the EU Payment Services Directive (PSD2) will require open access to customer accounts, according to a UK law firm TLT’s Digital Banking report. This is despite 67% stating that they were well prepared for PSD2.

Post-Brexit, some UK banks may have been hoping to move this off the agenda. But, the CMA’s recent report into competition within the UK’s retail banking market concluded that an open API banking standard is key to increasing competition. Banks will therefore still need to prepare for a more open banking environment.

“Regulators are increasingly focused on innovation to encourage competition. This was the driver behind splitting out the regulation of payment systems from the FCA in the UK. The new EU Payment Services Directive is also part of that agenda – lowering barriers to entry by getting banks to open up information to the market,” explains David Gardner, a financial services partner at law firm TLT.

“The new PSD2 rules are clearly on banks’ agenda. But, there is still a lack of awareness within some financial institutions around key elements, including open access to customer accounts.

“The CMs’s proposal for a unitary mobile app for banking services on a cross-provider basis, based on PSD2 and open API access would be a genuine game changer in retail banking.

“There are considerable technological, security, governance and legal challenges in delivery. But, with change continual and unpredictable in this sector, it is clear that established banking institutions face tough competition in the years ahead.”

The report also found that investing in payment services technology is falling behind areas like online banking and in-branch technology in terms of investment priorities for financial institutions over the next three years.

FI Areas of investment over the next three years

The dominant payment services offered to merchants remain Chip & PIN (65%) and contactless payments (58%), with the newer payment services such as Apple Pay (35% offering / 27% testing) and Android Pay (35% offering / 23% testing) gaining more slowly ground. There is also increasing interest in contactless payments via ‘wearables’, with 38 per cent offering this service and 23% testing it.

Over 70% of financial institutions providing payment services to merchants are offering, or planning to offer, data analytics and customer intelligence services as added value services.

“Financial institutions aren’t standing still, with effective technology-led change like the increasing use of “big data” to enhance core payment services now commonplace, and brought to market through successful development and collaboration,” concludes Gardner.

“However there are new payment services that could present a more existential threat to the status quo, like peer-to-peer and digital currencies. Although these currently lack the scale and market penetration to mount a serious challenge, established institutions shouldn’t be complacent.”

The post FI’s unaware of customer account access obligations under PSD2 appeared first on Payments Cards & Mobile.

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