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What is PSD2 and what impact will Brexit have on it?

What is PSD2 and what impact will Brexit have on it?

PSD2 is the second Payment Services Directive, designed by the European Union. It is envisioned that it will revolutionise the payments industry across the EU. Everything from the way we pay for goods and services online, to what information we see when making a payment.

PSD2 is good news for consumers, even if adapting to the new requirements will require a good deal of investment on behalf of the industry. PSD2 was introduced at a European level in 2015, but members of the EU have until 2018 to implement it – which is becoming more and more important now.

What are the main changes PSD2 will bring?

PSD2 will remove the bank’s monopoly on their customer's data. It will allow businesses like Apple, Amazon, to retrieve your account data directly from your bank – with your permission. The benefit here is that when you buy something they can make a payment for you, without having to go through another service (like Stripe or Mastercard).

For consumers who hold more than one bank account, the changes would also allow Account Information Service Providers, to display all their account information in one place for them. Bringing together everything from balances and bills to your credit score and more. It is like your financial life, in one place making it easy to understand.

Stronger identity checks when paying online will be mandated by PSD2. The specifics are still being debated – but it is highly likely to involve more checks than is currently in place, particularly for high-value transactions.

Will this make payments cheaper?

PSD2 will prohibit the use of non-transparent pricing methods for international payments.  Currently, banks and brokers often hide extra costs in exchange rates, which is much lower than the mid-market rate you’d see on XE.com. Normally you only see upfront fees, either a fixed fee or a percentage of the transfer amount, meaning that customers can be hit with extra fees when the exchange rate used is less competitive than what they were expecting.

PSD2 states that consumers should know ‘the real costs and charges of transferring money abroad.  It’s not certain that the Government will uphold this commitment – this was also a commitment for PSD – but it was not upheld.

PSD2 & Brexit

Current thinking is that the UK will leave the single market. If this happens, then there will be more uncertainty. What is certain is that there will be plenty of stories like this coming out of Europe over the next 2 years:

"In a blow to London, EU considers passporting for fintech services"

How viable the above story is, is impossible to tell but it makes for a great headline and there will be lots more like this over the coming month.

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