Making Consumers Lives Easier

By Chris Jones, Director • PSE Consulting

March 04, 2016

PSD2 and Access to the Account

Today’s European online payments market is characterised by extremes. Some consumers utilise multi-device single touch payment products.

Others have to endure complex and inefficient manual payments based on email invoices, cash on delivery, or separately logging onto their online banking portals.

In order to improve efficiency and promote the use of digital commerce, the European Commission plans to streamline consumer’s access to their payment accounts which will particularly improve e-commerce payments. The Second Payment Services Directive (PSD2) which was passed in December 2015, introduces a new set of regulated players into the payments landscape called Third Party Processors. This new role is designed to enable consumers to gain more efficient, consistent, secure access to their online accounts in three scenarios:

  • Initiating credit transfers via the consumer’s online banking and payments platform
  • Accessing consumer transaction information
  • Asking if a certain amount is available in a consumer’s account.

Divining the exact outcomes and impacts of this innovation is difficult, but there are a number of possible new opportunities to make consumer’s online life easier:

  • Faster Application Processors: Consumers applying for credit cards, loans or mortgages will no longer need to provide reams of paper statements to potential lenders. Instead they could provide their online banking credentials and the lender could directly access the consumer’s transaction details. This could accelerate application processing, support the use of mobile and tablet consumer devices, reduce consumer drop-out and significantly reduce costs.
  • Faster E-commerce Payments: When consumers pay for goods or services online they will no longer need to separately log-on to their banking portals, and rekey merchant’s bank details, amounts and payment references. They could log in to their online banking portal at the merchant’s site and approve a pre-completed credit transfer authority. This will minimise errors, speed up check-out and reduce consumer drop-out, particularly on mobile and tablet devices.
  • New Digital Products: Consumers could sign-up for a new breed of merchant co-branded payments products decoupled from their current accounts with range of merchant benefits. Here the issuer of these new products could get an understanding of the fund available in the consumer’s current account each time the product is used reducing the risk when they collect funds.

The European Banking Authority has the challenge of defining the framework within which these new players will operate. Their standards should emerge by the end of 2016, after which there will be a scramble by the banks and the Fintech sector to develop and deliver new innovative services designed to make the consumer’s online payment process easier.

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