If you’re a company in Europe, you may have recently heard about the Revised Payment Service Directive, otherwise known as PSD2. The European Parliament adopted these rules on October 8, 2015, to help foster a safer system for European payments. The goal of the initiative was to:
• Protect consumers who pay online
• Protect European payments that occur cross-border
• Encourage the development of open banking online payment systems
At the time, Commissioner Jonathan Hill said, “This legislation is a step toward a digital single market; it will benefit consumers and businesses and help the economy grow.”
Although PSD2 went into place on January 13, 2018, many companies are still working to implement the mandatory changes. Below, you’ll find a breakdown of some of what the Revised Payment Service Directive is and how it impacts companies operating in Europe.
Primary Aspects Of PSD2
PSD2 sought to oversee transactions to help create a safer online system. One such example is the fact that the measure broadened the scope of which purchases were subject to regulation. Under the new law, both “one leg out” transactions, along with transactions that occur in any currency, are both subject to regulation.
Additionally, PSD2 required stricter customer authentication. Not only does this come into play when on-boarding customers, but it also takes place every time a customer accesses his or her payment account online. Customer authentication is now also required whenever the customer performs activity through remote channels or when the customer initiates electronic remote payment transactions.
Furthermore, PSD2 also requires companies to set up an internal dispute resolution system. Companies must now map out a maximum processing time in which they’re allowed to deal with customer complaints. Also, payment initiation service providers must also provide secure communication facilities and treat all initiated payments equally.
How Does PSD2 Impact Financial Institutions?
Perhaps the most critical part of PSD2 is the fact the companies is the customer authentication factor. Every time they log into the app or website for their financial institution, they are going to need to provide authentication. Many customers may elect for things such as two-factor authentication.
Additionally, customers may opt for things such as fingerprint scanners or facial recognition technology instead of a password. It’s easy for hackers to steal a password, but it’s much more challenging to enter a financial system blocked by facial recognition technology.
Financial institutions will need to invest in high-quality facial recognition technology as a result. If they opt to use inferior facial recognition technology, there’s a chance that hackers could break through. To help keep their customer’s sensitive financial information safe, companies will want to make sure that they invest in high-quality facial recognition technology when meeting PSD2 regulations.
Other Critical Changes Brought Upon By PSD2
One of the other critical changes that financial institutions will see as a result of PSD2 is the fact that customers can use third-party providers to manage their finances. This means that they could use integrated apps like Instagram to pay their bills directly, even though the funds remain nestled safely in their bank account.
To provide third-party apps access to customer’s information, banks must use open APIs. Open APIs will allow third-party sites to build dedicated financial services on top of the bank’s existing infrastructure.
KYC processes are going to be critical here. If a hacker gains access to a customer’s information, what’s stopping them from operating as a third-party app in need of access to the customer’s bank account? Financial institutions are going to have to invest in KYC efforts to ensure they’re protecting their customer’s sensitive financial information.
In some regard, PSD2 should cause banks to want to update their existing systems. Banks are no longer going to be competing against one another. Instead, they’re going to be competing against third-party institutions. This should prompt them to want to provide their customers with the absolute best in terms of protection.
Investing In Quality KYC Products
Not only can investing in quality KYC products ensure you meet PSD2 regulations, but it can also help protect the sensitive information of your customers. Today’s best KYC services and programs are built not just so that they’re compliant now, but so that they’re compliant in the future as well.
No matter if you’re a financial institution or third-party company in Europe looking to provide financial services, be sure to contact our team at AU10Tix today. We offer solutions that we guarantee to meet the regulations set forth by the European Union. You can trust that you’re investing in a high-quality product that will protect your customer’s assets.
By protecting your customers, you end up protecting yourself as well. Customers will be much more willing to work with you knowing that their financial information is secure. We’ll design a solutions package that meets your business needs.