The implementation of Europe’s second Payment Services Directive (PSD2) has unlocked a number of new open banking solutions, such as Request to Pay (RtP). This new solution combines SEPA payments (both classic and instant) with PSD2’s provision for licensed third parties to access and service accounts held by other banks to allow payment service providers (PSPs) and merchants to receive payments on behalf of their customers in a lean and efficient manner.
With markets now adjusting to the changes, these solutions are quickly being put into practice. MultiSafepay, an online payments specialist and one of the pioneers of e-commerce in the Netherlands, is one of the first to take the initiative, participating in a pilot scheme for Deutsche Bank’s innovative open-banking RtP solution, which is now being rolled out to a series of merchants in Germany, with plans to enable it across Europe and beyond.
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In a commentary article for International Banker, Sindhu Vadakath, Senior Product Manager, Global Payment Services and Asia Payments, Treasury Services, BNY Mellon, takes a look at the introduction of the Second Payment Services Directive (PSD2) and the impact it will have on the core of traditional banking.
PSD2 requires banks to share their closely guarded customer data, opening the gates for the first time to third-party payment providers (TPPs), thus disrupting banks’ long-held monopoly on the payments sector. With an aim to improve transparency, customer rights and service, as well as the costs linked to the end-to-end payments process, the legislation allows TPPs to harness customer data to create cutting-edge products that can viably compete with bank offerings.
But this data-sharing, of course, is not without its risks – especially as TPPs cannot claim the same historical reputation for security and familiarity as their bank counterparts. As such, collaboration between these industry players is key to ensure a smooth roll-out of an efficient and secure payments service for customers in the new era of open banking.
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Writing for Global Finance & Banking Review, BNY Mellon’s Carl Slabicki, Director, Immediate Payments, Treasury Services, takes a candid look at the arrival of open banking, and what it could mean for the banking industry.
As part of PSD2, financial institutions are now required to share client data with third party payment providers such as fintechs – thus breaking the historical monopoly that banks have held over this client data, and potentially altering the core banking experience as we know it. This data is a valuable business asset, says Slabicki, as it can pave the way for new services from non-bank providers such as loan and mortgage comparison platforms and financial advisory portals.
Although these innovations could enhance the client experience and stimulate healthy competition, the now-accessible data certainly faces significantly heightened security risk. As such, it is vital that the regulatory environment is fluid – able to adapt to requirements accordingly – and that banks focus on supporting these efforts to ensure a smooth transition into the era of open banking.
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With significant developments such as SWIFT gpi, instant payments, and the Second Payment Services Directive all either coming into play or entering full maturation in the European payments market, Cédric Derras, Global Head of Cash Management at UniCredit, explains in Treasury Management International how these initiatives add up for corporates, who stand to benefit from faster, more efficient, and more tailored services.
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PSD2 comes into force on 13 January 2018. It aims to open up the European payments market to greater competition and transparency, but Christian Schaefer, global head of payments, cash management, Deutsche Bank, believes its effect will be more far-reaching.
Writing for Banking Technology magazine, Schaefer suggests it is no exaggeration to say that the result will be a fundamental reshaping and renewal of the European payments and wider financial services markets over the next two to five years, with a host of new players and a range of innovative and tailored services being offered to customers, who will be the prime beneficiaries of these changes.
After becoming compliant by the January implementation date, the next step on this journey is Europe’s financial institutions developing or buying in third party account interfaces to comply with PSD2, says Schaefer. These may either be dedicated third party interfaces, or customer interfaces suitably modified to be PSD2-compliant. Both routes – dedicated interface and modified direct access – require careful consideration.
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With instant payments and the new Directive on Payment Services (PSD2) on Europe’s doorstep, the payments market is undergoing a paradigm shift in how consumers and businesses exchange money. Cédric Derras, Global Head of Cash Management at UniCredit, explains in The Paypers‘ Online Payments and Ecommerce Market Guide 2017 what these developments will mean for corporates and the wider payments community. In order to grasp the opportunities, and avoid any pitfalls, Derras explains that all parties involved will need to be proactive and brace for the transition.
To read this article in full, download the full Guide here and turn to page 111.
Are you PSD2-Ready?, a new whitepaper published by Deutsche Bank, outlines a number of challenges for banks tasked with becoming PSD2-compliant.
bobsguide sat down with Christian Schaefer, Global Head of Payments, Cash Management, Deutsche Bank, to discuss the report’s key findings.
Read the full article here.
On January 13th, 2018, the new European Directive on Payment Services in the Internal Market (PSD2) comes into effect, marking the next stage of the European payments market’s transformation. Christian Schaefer, global head of payments, Cash Management, Deutsche Bank, explains the implementation hurdles and opportunities in an article for FTSE Global Markets magazine – and sets out why financial institutions should strive to be PSD2-ready, sooner rather than later.
Admittedly, while there are significant time and resource investments required to become PSD2-ready, the benefits for both PSUs and PSPs should become evident from day one, says Schaefer. Even so, becoming PSD2-ready should not be seen as merely as an exercise in regulatory compliance. It brings many advantages that can grant banks and fintechs new revenue streams and opportunities to enhance their client offerings.
Institutions making the TPP interface operational in time for the effective date can also be among the first to implement Open Application Programming Interface (API) capabilities – allowing them to offer new, innovative products tailored to the evolving needs of their existing (and prospective) clients.
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It will be regulation-led, but make no mistake: 13th January 2018 will see the start of a deep-rooted and long-term transformation of the European payments market. This is when PSD2, the new European Directive on Payment Services in the Internal Market, comes into force. While this prospect initially caused concern to some in traditional financial institutions, most are now embracing it as a timely and necessary stimulus to the industry to future-proof itself against a new age in payments and banking services.
Writing for Finextra, Shahrokh Moinian, global head of cash products, cash management, Deutsche Bank, suggest that, given the clear benefits to customers, banks should therefore not delay getting PSD2-ready and instead participate in the consultations and act on the early drafts of the European Banking Authority’s Guidelines immediately in order to ensure smooth implementation projects.
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By January 13th 2018, EU member states are obliged to transpose the new EU Payment Services Directive (PSD2) into national law.
With the deadline fast approaching, organisations in the regulation’s scope must ensure they are prepared. As Sharokh Moinian, Deutsche Bank’s Global Head of Cash Products, Cash Management, puts it; “organisations affected – particularly financial institutions – must ensure they have a clear project strategy in place, a strategy underpinned by an in-depth understanding of the required legal and regulatory changes.”
To assist organisations in this last crucial implementation phase, Deutsche Bank has released its new paper, entitled: “Are you PSD2-Ready – A guide to the latest information and sources of support”. Produced in collaboration with PPI AG, this document not only covers the latest developments and most critical intricacies of the regulation, but also highlights the important next steps which market participants must now take.
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