A compliance date for the EU’s revised Payment Services Directive (PSD2) is looming (January 13, 2018). An article on a site hosted by international law firm Pinsent Masons (Out-Law.com), provides a perspective on the impact that the new regulatory construct will bring and in particular, how the more open banking environment that PSD2 drives will provide positive outcomes for consumers. First some background:
PSD2 is a further area of regulation to which banks are being asked to adapt. In the UK, those reforms are complemented by a broader shift towards an ‘Open Banking’ future. The CMA’s (Competition and Markets Authority) retail banking review led it to recommending that Open Banking standards be developed to improve competition in personal and business current account markets. These standards only apply to the UK’s nine largest banks: RBS, Lloyds, Barclays, HSBC, Santander, Nationwide, Danske, Bank of Ireland and Allied Irish Bank (the CMA9). The scope of the Open Banking reforms in the UK has been expanded to mirror that of PSD2.
The CMA9 must have the standards, which include a new ‘read-only data standard’ and a ‘read/write data standard’, in place by 13 January 2018 – the same date that the EU’s revised Payment Services Directive (PSD2) is due to be implemented.
From this article’s point of view, here is how open banking will provide consumer benefits:
…..Open Banking is of course not simply about enabling innovation for innovation’s sake. The CMA’s Retail banking market investigation, published in August 2016, found that the four largest banks in the UK accounted for over 70% of main personal current accounts and over 80% of business current accounts. Open Banking was deemed a remedy needed to boost competition amongst retail banks.
PSD2 is aimed at opening up the payments market in the EU to innovative new services. Banks and other payment service providers (PSPs) will be required to provide access to payment account information of their customers to approved PISPs and AISPs at the request of those customers on a non-discriminatory basis. Only in select cases, such as where banks suspect a fraud risk, for example, can that access be denied.
The unfolding of open banking in the UK will be fascinating to watch. Already U.S. banking and payment participants are calling for greater openness in the U.S. market. With over 13,000 chartered financial institutions and a robust fintech environment, it’s not clear that a mandate is needed.
Overview by Sarah Grotta, Director, Debit Advisory Service at Mercator Advisory Group
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