PSD2 – (EU) Payment Services Directive #2

The EU’s objective for PSD2 is to facilitate increased competition, transparency and innovation in the financial services sector.

In order to achieve this, the banks are now obliged to allow electronic access to their customers’ bank account transactions, with the approval of the customer, with other licenced 3rd party providers (TPPs) using standardised APIs (Application Programming Interfaces).

The directive took effect in January 2018 and pillar banks in Ireland are offering the APIs with the rest of the Irish banks to follow next year. In the UK where it is known as Open Banking, there are at least 12 banks already offering the APIs as well and in time its use throughout Europe will be pervasive. Watch the short video below for an overview.

The change presents some challenges to the banks as it not only opens up their private silos of customer information to competitors but also presents huge opportunities for organisations who are among the first to embrace PSD2 and offer innovative new services.

It is expected that initially consumers will be able to use PSD2 to compare bank charges and get better value through switching or negotiation, but ultimately a wider adoption of PSD2 by financial companies will allow consumers to be approved for credit cards, and loans much faster, and to aggregate multiple accounts in real-time.