The world after PSD2: Compliant or competitive?


24 Nov 2017141 Shares

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European Central Bank headquarters in Frankfurt, Germany. Image: S-F/Shutterstock

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The finance industry has decisions to make and steps to take in the post-PSD2 landscape, and Comtrade Digital Services has some advice.

In January 2016, the Payment Services Directive 2 (PSD2) passed by the European Union came into legal force, altering existing legislation with the aim of creating safer and more innovative European payments. With the expiration of the two-year implementation period in January 2018, the banking industry will be facing a post-PSD2 world. This is something that Comtrade Digital Services believes will give those in the finance industry two options: go all in and get on board the digital train, or back away, potentially forever.

Thanks to regulations, the banking industry used to be well protected against new (ar)rivals. However, with PSD2, the European Union has created a framework that integrates payment services of all types into a shared competitive environment, driving security as well as innovation. In a white paper published on the topic, Comtrade Digital Services explains that the new directive should not be considered as merely a compliance challenge, but viewed as an opportunity to create and maintain an edge over competitors.

The digitisation of banking

The changes associated with PSD2 largely revolve around the digitisation of the banking sector. The pressure already being put on traditional banks and insurance companies by fintech companies will intensify, as the directive opens the finance industry up to new players other than banks, creating a much more competitive and innovative environment. These new players, including account information service providers (AISPs) and payment initiation service providers (PISPs), represent a huge threat to the established model.

The banks of the future may not resemble those that we are accustomed to today and, in order to survive – and, in turn, thrive – banks should rise up to the technological, operational and strategic challenges posed by the implementation of PSD2. The white paper outlines concrete actions that banks can take now to be best prepared for these challenges, starting with a thorough analysis of the business impact of PSD2.

Compliance will be key

The first step for all is to become compliant with PSD2, putting safety and security first. Achieving compliance will involve investment in areas such as verification, with multifactor authentication a requirement for most payments under the new directive. Tackling these areas head-on and fulfilling PSD2 requirements will bring peace of mind in terms of potential penalties and lawsuits.

Where banks can really achieve a competitive edge is going beyond compliance. PSD2 presents significant opportunities to generate new revenue streams, capture customer ownership and progress towards an extended ecosystem centred on the ‘everyday bank’. Comtrade Digital Services has identified four strategies available to banks in order to respond effectively to the threats and opportunities associated with PSD2, outlined in the white paper with clear pathways to competitive success open to those willing to innovate, but a proactive approach is needed. In other words, inaction in the face of change could lead to your organisation becoming irrelevant.

Download the Comtrade Digital Services white paper today to learn more about how your business can stay relevant in the new payments world.

European Central Bank headquarters in Frankfurt, Germany. Image: S-F/Shutterstock