[container section_title=’Container’ fullwidth=’no’ bgtransparency=’0′ top=’20’ bottom=’20’ innerbottomshadowsize=’0′ bordertop=’0′ borderbottom=’0′ collapse=’false’][column type=’12’ last=’1′][title fontfamily=’Muli’ textcolor=’#8224e3′ fontsize=’17’ th_height=’10’ th_margintop=’5′ th_bgtransparency=’0′ th_bgpattern=’3′ animation=’default’]PSD2: Everything you need to know[/title][text google_font=’Muli’ transparency=’0′ animation=’default’]The new PSD2 online payment policy is here, with changes that you will notice if you usually shop online and much more if you have a digital store, e-commerce, or sell online. Turkey Republic has also adopted PSD2 principles. This article is not related to Turkish financial system but most of them are valid for Turkish payment systems.
What is PSD2?
The PSD2 or Payment Services Directive 2 is the new European directive on payment services that comes into effect on September 14, 2019. Its objective is to create new payment possibilities for electronic commerce and also strengthen security in online payments.
A few years ago I was already telling you that with new technologies the European authorities began to create rules to regulate both “traditional companies” (lifelong banks) and new “fintech” companies or companies.
This term, fintech, is used to define “Financial Technologies” or financial technologies, that is, the “modernization” of typical traditional financial services (accounts, transfers, loans …) using new technologies such as the Internet, social networks, apps for mobile, etc.
And this in many cases has resulted in an improvement of those financial services and at a better price.
Well, PSD2 is precisely that, to regulate everyone for everyone in the sector of financial information and digital payments, whether through cards, virtual payment accounts, bank transfer, etc.
What does PSD2 bring back?
Well, PSD2 addresses very important issues, such as issues of consent, responsibility, security, authorizations to carry out operations, etc …
Regarding security specifically, as of September 14, payment processors (the systems in charge of managing online payments) will have to authenticate payment operations in a reinforced way , according to the new SCA standard ( Secure Customer Authentication ).
This mainly translates into confirming payments with at least 2 of these 3 possible ways:
Something you have: the mobile, the DNI, a card, etc.
Something you know: a PIN, a password, a response, etc.
Something you “be”: biometric identification using your eyes, your face, your fingerprint, your voice, etc.
But perhaps the most novel is the appearance of 2 new figures of “digital financial service providers” or TPPs ( Third Party Provider ):
PISP (Payment Initiation Service Provider)
The Payment Initiation Service Providers move money between individuals or companies by bank transfer, without the need for the payer to manually enter any payment details of the beneficiary.
Said this way, the core of this new payment method is not appreciated, but in an eCommerce, it implies that anyone can pay for an online purchase simply by selecting the bank where they have their checking account and entering the same credentials with which they access their electronic banking. The money will go directly from your checking account to the bank account of the store without the need for cards or PayPal.
These providers have not already existed in Turkey. We are expecting these firms soon.
In short, these payment initiators allow eCommerce to collect sales directly from users’ checking account, without leaving the cart of the online store.
AISP (Account Information Service Provider)
The Account Information Service Providers allow users to have access to all the details of their bank accounts from the same site.
In this sense, a few years ago mobile applications such as Buluttahsilat or Kobaküs appeared in Turkey, which offered this to their users, alerted them of charges or showed information on their expenses over a period of time, etc.
At first glance, it may seem impractical, but if for example in the future you request a loan online, these providers will be able to see the status of your bank accounts to evaluate them and approve or reject that loan, almost in real-time. Always, of course, with your express consent.
And it is that, until the entry into force of PSD2, both information providers (AISP) and payment initiators (PISP), operated in a legal vacuum. From now on, they must be payment entities authorized by the relevant supervisory body, in the case of our country, Central Bank of the Republic of Turkey.
In addition, banks will be obliged to “open their doors” and provide information and payments to the new profiles of financial providers, so that they can offer more comfortable and simple services to users.
This is what has been called as Open Banking.
Open Banking with PSD2
To do this, financial institutions have to create the necessary computer systems and protocols so that any authorized provider ( of Payment Initiation or Account Information ) can connect to them through APIs ( Application Programming Interfaces).
In this way, both traditional banks and new providers will play by the same rules. 🙂
🔸 New PSD2 products and paid services
With robust banking APIs and growing demand for online business, the entry into force of PSD2 will make many more payment services appear, of which we can highlight these 4:
Transfer payment method for online stores
Recurring transfer payments
Online bill payments
Automatic bank reconciliation
I detail them below:
1) Transfer payment method for online stores
Starting this September, online stores will NOT depend only on payment gateways based on cards or PayPal but will be able to offer other payment alternatives to buyers, such as online direct transfer.
It is a cheaper, faster and safer system than the one offered by the card, so in the near future, it will be the most widespread payment method in online commerce.
2) Recurring transfer payments
This possibility can have a great impact for subscription-based business models (such as membership websites), since it will allow offering recurring payment without the need to sign cumbersome direct debit documents or rely on debit/credit cards .
Instead, paid subscriptions can be signed in 3 simple clicks. 👌
3) Online bill payments
For intercompany or B2B payments there are also endless opportunities. Thanks to the services of the Payment Initiators (PISP), invoices can be paid directly from an email, SMS or any digital document, such as a PDF file.
4) Automatic bank reconciliation
And also for the B2B environment, this service represents a great reduction in administrative costs, since the entire bank reconciliation process (the check that companies and banks make to see if the “accounts” are correct) will be automatic.
The payment service provider will electronically notify the receipt of an income, which will automatically account for receipts received by bank transfer without the need to review bank statements.
🔹 Advantages and disadvantages
The main advantage of PSD2 is the strict but dedicated regulation that it offers to financial service providers, incorporating the new figures of Payment Initiators (PISP) and Account Information Providers (AISP). 👍
With this, the main beneficiaries will be the users of these services, who will gradually see digital financial services adapted to their needs.
The main drawback, of course, is once again the traditional banking sector, which continues to view the arrival of PSD2 with skepticism. 👎
Why?
Well, until now they enjoyed total isolation that gave them extreme independence, being the only players in the market. But now, forced to share the data with other authorized providers (the so-called Open Banking), controversy arises.
And it is that the first test versions released by traditional banking, far from fulfilling the purpose of facilitating a secure connection between the provider and financial entities, are turning out to be a complex network of authorizations and web redirections that invite more to the abandonment by users that their use …
So the group of financial service providers wonders if the banking oligopoly intends to protect their business by promoting a bad user experience or is it that they are not directly thinking about it when they designed the banking APIs. 🤦♂️
🚩 Conclusions
PSD2 is not a restrictive nor mandatory regulation for online stores, but a door to a world of opportunities in the field of financial information and digital payments.
It is a European directive that focuses its objectives on the entry of new figures of payment processors, boost competitiveness, and improve security in online payments. Therefore, the only ones affected by the regulations will be those companies that issue or process payments, whether by card, virtual accounts, or bank transfer.
PSD3 on the horizon - what to expect? - Finahukuk
Aralık 4, 2022 at 6:13 pm[…] revision of PSD2 (Directive 2366/2015/EU), which came into force in 2015, is already eagerly awaited by many market […]