Let me start by giving you a few moments to think about this pop quiz question, kind of like the anticipation of what's wrapped under the tree.
The answer? Christmas is always a surprise. It comes the same time every year, so why is it such a surprise? Because by the time Christmas Eve arrives, the gift shopping has so often not been done!
This analogy came to mind when I recently read an article in IT Finanzmagazin called "PSD2-Studie: Mehr als jede zweite Bank hat Bedrohungen und Chancen noch nicht erkannt" (PSD2 Study: More Than Every Other Bank Still Hasn't Identified Threats and Opportunities). Like Christmas coming this December, we all know that PSD2 (the second Payment Services Directive) will come into effect in January 2018. But when it does, a significant number of financial institutions will still be surprised. And we've released a recent research report proving that Christmas isn't the only thing they'll be unprepared for.
The aim of PSD2 is to better protect consumers when they pay online, and to promote the development and use of innovative online and mobile payments. Plus, it makes cross-border European payment services safer. Let's be clear, PSD2 represents the biggest and most fundamental change (likely the biggest change we've ever seen) in the way that banking services are consumed.
What does PSD2 mean for banks?
Simply put, banks will no longer have a monopoly on their customers' account information. Beyond that, their monopoly on payment services will also disappear. Every bank will be required to make their customers' account details available to external parties. These external parties have been designated third-party providers (TPPs), and they're divided into two types:
Account Information Service Provider (AISP) - These new, innovative service providers will have access to a bank customer's account information. Services like this could analyze a user's spending behavior or aggregate a user's account information from several banks into a singular overview.
Payment Initiation Service Provider (PISP) - These service providers, likely merchants, will initiate a payment on behalf of the user. This means that a customer could "authorize" meinkauf.de to collect payment for goods directly from their bank account and not via merchant acquirers or card schemes.
What does PSD2 mean for customers?
Fundamentally, it increases customer choice and puts customers firmly in control over their own account information. Banks won't be able to "refuse" a TPPs request for account information (as long as the appropriate consent has been collected). And they can't delay providing information to the TPP or even charge the TPP for the data.
This is a huge departure from the way banks are used to doing business today. And if they had the choice, this would likely affect how they choose to do business in the future. But the reality is that PSD2 is coming, and we have to deal with it whether we want to or not. Just don't treat it like Christmas and wait until it's too late.