The Second Payment Services Directive (PSD2) is all about making the European money markets safer and more competitive.
Most importantly, it focuses on the transfer of control of your banking and transactional history, taking it from the banks and giving it back to you.
It may sound like a small thing, but now that the information belongs to you and not the banks, you are free to share it with whom you wish. This means that a whole host of new Third Party Providers (or TPPs) are able to provide better informed and more targeted financial products designed solely for you if you decide to share this information with them.
These new TPPs will (in the main) be able to provide services by using the data and infrastructure already in place that are currently used by banks. They will either act as a PISP (Payment Initiation Service Provider) or an AISP (Account Information Service Provider).
PISP (Payment Initiation Service Provider) is a provider that allows authorised transactions to take place directly between a merchant's website and a customer’s current account. They effectively cut out the ‘middle man’ and simplify payments.
AISP (Account Information Service Provider) are companies like Oval. With a customer’s authorisation they can access information relating to their transactional history on all their current accounts across different banks, and aggregate the information for them in one easy to access financial dashboard.
How PSD2 helps us at Oval
Currently Oval, as with all TPPs, accesses your account information through a mechanism known as Direct Access (or screen scraping). The way this works – as you have seen when you have connected your account to Oval – is that we register your banking login credentials so that we are able to access the customer-facing area of your bank account. (ie. the part that shows your balance and transactional history).
From this information we are then able to create the financial dashboard, which you see on the app: the one that provides you with a break down of your spending by category and that helps you design effective savings steps.
With PSD2 though, the need for Direct Access will disappear, as banks will legally need to provide open APIs which all TPPs will be able to access (not sure what an API is? Check out this handy video). This means that with a customer’s authorisation, companies like Oval will be able to request this information directly from the bank itself, meaning that the process will be faster and more streamlined, as well as more secure. There will be no ‘update delay’ between what you see on your bank balance and what you see on your Oval dashboard.
How PSD2 helps you
1. Full connection: Currently, there are a number of smaller banks which cannot be connected to your Oval account. This is because they do not have the digital infrastructure to support Direct Access. With PSD2, when they will legally be required to provide open APIs, meaning that no matter what you bank account, you will be able to connect it to your Oval Dashboard problem free!
2. No hidden fees: Another requirement of PSD2 is that it will put a stop to ‘hidden fees’. Currently, your bank may charge you a transfer fee when you move your savings from your current account to your digital wallet at Oval. After PSD2 is implemented, these charges will no longer exist.
3. Simple life: Finally, having control over your own data and a clear comprehensive view of all your current accounts in one place will make your financial life simpler and healthier. Understanding your own financial habits will allow you to make choices to improve your financial health and to request and accept only those financial products that work best for you.