Explained: Revised Payment Services Directive (PSD2)

The European Union’s Revised Payments Services Directive (PSD2) has many purposes. PSD2 aims to improve the European payments industry by promoting healthy competition and increasing the participation of non-banks. The directive provides protections by facilitating the harmonization of rights and obligations of consumers and payment providers across the European Union. It also aims to empower consumers, by giving them more control over their data, and improve security for online payments.

A practical example

As of the launch of PSD2, banks are now required to provide third parties with access consumer’s banking data once the consumer has given explicit approval. Because of PSD2, fintech developers are able to create apps that directly interface with the consumer’s banking data and pull information from various bank accounts.

In other words, somebody with bank accounts at three different banks can now download a third-party app, provide the necessary permissions and thus gain never-before-seen insights into his or her financial situation through a unified dashboard.

Consumers can now also authorize payments via these third parties. PSD2 allows registered service providers to act as acquirers and deal directly with the banks on behalf of the consumer, completing transactions without the need for an intermediary.

Fintech companies are increasingly handling more banking duties on behalf of consumers. PSD2 makes sure that these third parties play by the rules and that consumers have the final say on how their banking data is managed.

Learn more about PSD2 at the following resource:
Payment services (PSD 2) – Directive (EU) 2015/2366

 

Other articles in this series:

  • Explained: SCA
  • Explained: 3DS2