Understanding the PSD2 regulation – everything you wanted to know

The revised Payment Services Directive (PSD2 regulation) is set to bring payments in Europe to the next stage of development; it is a data and technology-driven Directive that aims to help develop a unified payment services sector that better fosters competition, innovation and security of internet payments and account access.

Main changes introduced by PSD2

In a new White Paper “Understanding the PSD2 regulation,” the main changes introduced by the new PSD2 regulation, including opportunities and benefits for key stakeholders are discussed.

With this new regulation, the European Commission (EC) aims to develop a unified payment services sector that better fosters competition, innovation and security of online payments. Innovative stakeholders will now have an opportunity to become payment institutions and to directly access users’ bank accounts, creating new business opportunities.

Major benefits around cost, convenience and speed for consumers will spread across the region.
By providing standardized access to customer data and banking infrastructure, PSD2 will lower the
barriers for entry to third party providers (TPPs) and financial technology companies (FinTechs) in
Europe’s payments ecosystem, and it will stimulate the development of new business models and a
wide range of new banking services.

The growth of “push” payments directly from bank accounts and instant or real-time payments transactions are some of the major goals introduced by the new regulation.

However, not all stakeholders in the payments industry have welcomed the new regulation, showing
strong skepticism to its benefits. Critics believe PSD2 will increase costs and complexity of doing
business in the regulated payments space.

For instance, it increases the attractiveness and use of unregulated payments such as Bitcoin; it encourages the growth of alternative players in the payments sector who do not manage money but who provide data tools, etc.

Nevertheless, depending on how stakeholders choose to respond, the new directive can be either a
catalyst for the development of valuable new business models or a threat that will spawn serious
competitive challenges.

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