With the revised Payment Services Directive (PSD2) set to come into force in the new year, much has been made of how banks will be nervously looking over their shoulders. And with good reason given that they will be forced to share their customers’ data with a host of new players looking to compete with them across a range of financial products and services.
These include account information service providers and payment initiation service providers that could potentially become customers’ first port of call for financial services, rendering banks little more than account providers.
But let’s not get ahead of ourselves here. While banks will no longer have a monopoly on their customers’ data they won’t be cut out that easily, and are no doubt looking at ways to monetise that access through new products and services.
And they have time on their side. Under the Access to Account rule, banks must open their APIs to give third-party service providers access to accounts and data – as long as they have account-holders’ consent. But until there is a Europe-wide API in place, that access will remain fragmented, so it will take a few years to see what you can get out of it.
We’re in that position ourselves. Having a more complete picture of customers’ spending and payment transactions through access to their accounts would support credit decisions, for example, giving us a clearer idea of what the consumer is able to pay at the end of the day. But how that will pan out in practice is still unclear.
If we hop over the technical hurdles for now though, there are some indications as to how we can support payment service providers and retailers at checkout.
The Intercahnge Fee Regulation capped fees on card payments, encouraging payment providers to push alternative payment methods such as pay-after-delivery as they looked to earn money elsewhere. PSD2 is likely to see more of a payment mix with payment initiation services also making mobile wallets and direct debit more attractive to retailers looking for cheaper alternatives to cards now that they can no longer cover processing fees through higher prices.
But while direct debit is popular with consumers in Germany, for example, who can cancel or recover payments up to eight weeks after settlement, retailers have been liable to credit or fraud risk. Payment initiation services effectively remove that risk by getting authorisation direct from the consumers, securing their money quicker with authorisation and settlement in real time.
That’s all well and good, but with payment providers now having to apply two-factor authentication such as pin number and fingerprint for online payments, the case for our pay-after-delivery solution AfterPay becomes even stronger. Not only does it make it easier for retailers to manage their costs, it also makes the checkout process more convenient by letting customers pay later.
– Managing Director –
Arvato Payment Solutions GmbH