Whether it is business owners, banks, or payment gateways, everyone has to follow the government’s guidelines for the regulation. In the wake of payment digitalization, it has become even more critical to deploy stringent regulations on the functions. Businesses of all types are currently exercising electronic payments to get the ease and convenience of conducting monetary transactions.
Over the years, there have been plenty of derivations and amendments in the payment services and regulations that everyone has to follow. If you are a business operating under the European Commission, you would definitely know about the PSD2 that has emphasized the payment’s safety and security.
This article will get to know more about PSD2 compliance and what impact it has.
What is PSD2?
The European Commission has always aimed to enhance the EU rules regarding electronic payments and make it more secure and more straightforward. So, businesses can conduct international payments without any hassle and with compliance with the regulations. PSD2 addresses the various payment services through the internet and mobile wallets. PSD2 rules are spread over different aspects:
Electronic Payment: There are rules related to electronic payments to protect the consumers’ confidential data, including guarantee authentication, financial data, etc., in order to reduce the fraud risk. Businesses have to be abiding by the PSD2 SCA rules to make payments secure for the customers.
Payment Services: PSD2 brings a wave of innovative change in payment services. There is more transparency about the payment product and more focus on the information shared through it.
Providers and Users of Payment Services: When it comes to the providers and users of the payment services, PSD2 has clarified the obligations and rights of both the parties with respect to the information requirements.
“PSD2 is primarily about placing everyone under a unified and central framework. This regulation is meant to bring balance and innovation in the European payments market.” – Wrobel Konior
How PSD2 Can Change The Payments Market?
Though the wider approach of PSD2 is to bring balance in the payment field, there are some specific implications that have been impacted-:
- Widening the EU Payment Market: Businesses are allowed for payment initiation services or account information in the market. This will allow businesses to broaden their approach.
- Improving Customer Rights: Customers are the most benefited by PSD2 compliance. It has removed all the surcharges for debit/credit card usage. Above all, customers get a refund after debit card purchases for a limited period. There will be a lesser liability for non-authorized payment.
- Restricting Interchange Fees: PSD2 has curtailed the interchange fees that occurred between card and bank transactions. It used to bring down the merchants for debit and credit card acceptance.
“With the inclusion of PSD2, the payments all across Europe will become faster and competent for the customers, thereby, giving them more choices and services.” – Wrobel Konior
Entities Influenced by The PSD2
Key players in the payment market have been impacted by the PSD2. Here are some of the majorly affected players:
- Account Information Service Providers: AISPs are entities that use APIs to provide customers with account information. For instance, a money management app is a form of AISP that accesses multiple accounts for monitoring, budgeting, etc. Now the AISPs will need authorization from the customers to gain access to the accounts.
- Account Servicing Payment Service Providers: ASPSPs are the financial institutions, including credit unions, banks, loan houses, etc. ASPSPs cannot access all the information from the users without their permission.
- Payment Initiation Service Providers: PISPs are the ones who can access customer data and transaction information without ASPSPs’ agreement. Unlike AISPs, PISPs can access users’ accounts without their agreement to make the payment on their behalf. For instance, a financial management tool is a PISP that helps in transferring the balance to a savings account and do the needful to manage financial transactions.
- Third-Party Providers: TPPs are ones who can initiate the payments via PISPs, or bank accounts. Third-party providers have to keenly comply with the PSD2 and ensure the customer data is not taken without their permission.
The Bottom Line
With the continuous risk of fraud and malpractice in the electronic payment world that puts providers and users in danger, it is necessary to bring PSD2. From small business entities to big corporate houses, everyone has to comply with the PSD2 rules. If you are operating under the European Commission, you need to learn how to be PSD2 compliant in order to stay protected and provide your customers with a secure payment scenario.
The above mentioned were some of the imperative details about PSD2 that you need to know about to follow it diligently. The EU countries had to align with PSD2 by January 13, 2018. The regulation regarding the SCA and other related compliance were to be met by September 14, 2019.