The Second Payment Services Directive (PSD2) is all about making the European money markets safer and more competitive.
It transfers the control of your banking and transactional history from the banks and back to you. Amongst other things, this control now means that you will have the right to grant access to chosen Third Party Providers (like Oval) to read your transactional history from all your different banks and accounts, and to consolidate all the information in one easy to access financial dashboard.
It allows us to make your financial life simpler and safer.
One of this year’s 2 major deadlines that has already been and gone with a few alarming results. The 13thMarch 2019 was the deadline for all European banks to provide a ‘sandbox’ testing environment for all third party providers (TPPs) to test the APIs the banks are planning to use. Unfortunately, according to Tink, 41% of these banks failed to comply.
Aside from any hefty penalties levied on them by the EU, this failure to comply indicates not only an alarming lack of readiness on behalf of the big banks to fully implement all aspects of the PSD2 by the time of the big deadline later this year, but also a lack of understanding of how important collaborative effort is in the successful implementation of open banking policies.
Without the testing environment, TPPs are unable to rigorously test the open APIs on which both they and the banks will be dependent once September arrives. These final three months should not be a stand off between the old and the new, but rather an opportunity for both banks and new financial service innovators to work together in order to ensure that they provide the best financial products for their users, and to ensure that they stay technologically and financially competitive.
The final and most important deadline for PDS2 is 14th September 2019. By this date all banks need to be compliant with PSD2’s three pillars: transparency, access to accounts, and strong customer authentication. Not to mention a plethora of other, just as important, edicts.
There are a number of different outcomes currently being discussed by financial experts. Many believe that the banks are simply not ready to implement PSD2 as a 'blanket' directive, and so when the deadline comes it will instead be implemented in stops and starts; with functional open APIs not likely to be ready and TTPs still having to resort to ineffective screen scraping for customer data. However, it should be noted that if banks fail to meet these deadlines they may face penalties from the EU. It also means that they risk falling behind competitors who have fully embraced and implemented the directive. This could lead to a performance gap that may prove too big to ever be closed. They run a potentially huge risk by not being ready for the September deadline.
Ideally, if all goes to plan, the 14th September should deliver frictionless banking that does away with many costly charges that the consumer currently has to pay. Surcharges when paying with a credit card online? Gone. Lax and inefficient security measures? Gone. Banks' monopoly on your own data? Gone.
What it will herald (as we said, ideally) is the dawning of an era with stronger anti-fraud processes in place, the removal of unfair levies and online payment charges, and great control over your own financial data among other things. In terms of your use of Oval, it will mean that when you give us access to your transactional data, we will have a much clearer idea of what your financial needs are and will be able to tailor make financial products that are right for you.
Instead of the old ‘one size fits all’ products that the banks have been churning out for years, finance will become made-to-measure.