PSD2 is regulation for electronic payment services in Europe. Its objective is to make payments more secure, enable banking services to adopt new technologies, and boost innovation. PSD2 is proof of the increasing importance APIs (Application Program Interfaces) are getting in various financial sectors.
Understanding more about PSD2
In 2007, the Payment Service Providers Directive (PSD) sought to participate in developing a single payment market in the European Union to boost innovation, efficiency, and competition in the union. Later in 2013, the European Commission came up with a proposal to reinforce these objectives, where the two came in to form PSD2. The new Payment Service Directive seeks to improve security on payments while promoting more innovative banking methods.
According to Jonathan Hill, European commissioner for financial stability, financial services, and capital markets union, European customers would like to know if their payments are secure whenever they transact online or shop. The new payment service directive is to ensure that electronic payment systems in Europe are more secure and convenient for shoppers in Europe.
The main goals of PSD2 include:
· Boost security.
· Promote innovation and customer convenience.
· Protect consumers.
· Promote competition.
· Contribute to the integration of payments in the EU.
· Promote technology and business model neutrality.
Importance of PSD2 in digital transactions
PSD2 comes with a wide array of advantages to consumers and businesses when it comes to digital transactions. They include:
More protection against fraud
PSD2 goals are based on existing consumer protection laws to protect consumers against fraud through integrating strong customer authentication for electronic transactions and enhanced security requirements. With the integration of payments and open access, mitigating fraud cases is critical for the safety of financial institutions and merchants. Business owners should set operational limits and implement strong fraud control strategies to be one step ahead.
It is no doubt that PSD2 brings a shift in how digital transactions are monitored, processes, and accepted. According to PSD2 legislation, there is too much online fraud, and one of the main objectives of the derivative is to ensure customer protection against fraud. That will enable merchants and other permitted parties to accept payments without redirecting back to a third party like a bank.
Ease of internet and mobile payments
Historically, a consumer’s financial data has always been healed by backs, but with PSD2, there will be permission for customers to hold their financial data. Consumers will be able to use payment account data services to access their payment accounts online to simplify internet and mobile payments. That will help them manage their data and accounts and make better comparisons when purchasing. Surcharges will also be eliminated for card payments in online and in-store transactions.
PSD2 will increase the number of financial service providers that customers can choose from. As more financial service providers come up, such as fintech companies, customers will be able to choose one that suits their needs to make the most of their account and transaction data. Financial services can turn PSD2 into payment innovation by offering a seamless and omnichannel payment experience that will become the new standard for processing digital transactions.
The bottom line
PSD2 will ensure that all payment service providers that operate in Europe are subject to appropriate rules. The legislation is a step towards creating a single digital market to benefit customers and businesses hence help the economy grow.