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On September 15, 2019, all banks in the European Union had to fulfill the requirements of the European Commission in accordance with the Second Payment Directive PSD2.
What does this mean?
Key message of PSD 2: the bank will be obliged to provide the payment service provider with financial information about the client and debit the money from his account, even without concluding a separate agreement. Just the client's order is enough!
For this, two new concepts have been introduced:
1. Service for initiation of payments PISP (Payment Initiation Service Provider).
2. Service for the aggregation of financial information AISP (Account Information Service Providers).
The first type of license directly gives the right to financial transactions. The second is to receive financial information. For security reasons, all information about the holders of these licenses is stored in a single register of the EU.
Thus, the system of contractual relations is replaced by a simple automated information exchange algorithm. And, importantly, payment providers are starting to play a key role, not the holders of funds, that is, banks.
In simple terms, you can create your own PISP (Payment Initiation Service Provider) and your clients will be able to make payments through you from their bank accounts without asking their permission. This option solves the main problem of payment companies - the safety of client funds. Today, thousands of payment companies in Europe offer their clients account opening and various types of payments faster, easier and cheaper than classic banks. But for all banks without exception, there is a guaranteed amount of compensation in the amount of 100,000 euros, which the bank's client will receive in case of insolvency of the credit institution. This reimbursement is guaranteed by government funds. But this rule does not apply to payment companies and systems. This is undoubtedly
Now you can keep your funds in a big serious bank, or in several, and not in one country, but in different countries of the European Union, without worrying about the safety of your funds, but manage all your resources, make payments from one PISP, and at the rates of this PISP itself.
What is the meaning of this innovation? It's just that in this way the European Union is trying to force the Banks to actively engage in the process of investment and lending activities, from which many credit institutions have simply withdrawn. Despite the rapid growth of the fintech industry, offering cheap or completely free (like Revolut) payments to their customers, banks, on the contrary, slowly but surely raised their tariffs for servicing customer accounts. Deposits in Europe have long been of no interest to anyone, since banks are overflowing with cash, so the negative rate on deposits no longer surprises anyone. Banks develop a variety of tariff plans for their clients, the ultimate goal of most of which is simply to get more money for the daily maintenance of the account.
On September 15, European banks had to open their APIs to third-party service providers so that they could write off money and receive information from customer accounts. However, in reality, most of the banks did not do this. And there are two problems here: first, banks are absolutely not interested in the development of this scenario, therefore even large and very technological banks have done everything to formally meet PSD2 requirements, to make the process of initiating payments and obtaining information as difficult and inconvenient for the client as possible. The second reason is that many smaller banks are simply not able to provide a professional and secure connection through the API to their systems, and therefore could not meet the requirements of the European Commission.
Well, it remains to be hoped that the European Commission will not back down from its intentions to liberalize the market for bank transfers and information exchange, as a result of which penalties will be applied to the late banks. And in the near future we will see a new, absolutely unknown direction for the development of fintech and related startups.
Wait and see!
What does this mean?
Key message of PSD 2: the bank will be obliged to provide the payment service provider with financial information about the client and debit the money from his account, even without concluding a separate agreement. Just the client's order is enough!
For this, two new concepts have been introduced:
1. Service for initiation of payments PISP (Payment Initiation Service Provider).
2. Service for the aggregation of financial information AISP (Account Information Service Providers).
The first type of license directly gives the right to financial transactions. The second is to receive financial information. For security reasons, all information about the holders of these licenses is stored in a single register of the EU.
Thus, the system of contractual relations is replaced by a simple automated information exchange algorithm. And, importantly, payment providers are starting to play a key role, not the holders of funds, that is, banks.
In simple terms, you can create your own PISP (Payment Initiation Service Provider) and your clients will be able to make payments through you from their bank accounts without asking their permission. This option solves the main problem of payment companies - the safety of client funds. Today, thousands of payment companies in Europe offer their clients account opening and various types of payments faster, easier and cheaper than classic banks. But for all banks without exception, there is a guaranteed amount of compensation in the amount of 100,000 euros, which the bank's client will receive in case of insolvency of the credit institution. This reimbursement is guaranteed by government funds. But this rule does not apply to payment companies and systems. This is undoubtedly
Now you can keep your funds in a big serious bank, or in several, and not in one country, but in different countries of the European Union, without worrying about the safety of your funds, but manage all your resources, make payments from one PISP, and at the rates of this PISP itself.
What is the meaning of this innovation? It's just that in this way the European Union is trying to force the Banks to actively engage in the process of investment and lending activities, from which many credit institutions have simply withdrawn. Despite the rapid growth of the fintech industry, offering cheap or completely free (like Revolut) payments to their customers, banks, on the contrary, slowly but surely raised their tariffs for servicing customer accounts. Deposits in Europe have long been of no interest to anyone, since banks are overflowing with cash, so the negative rate on deposits no longer surprises anyone. Banks develop a variety of tariff plans for their clients, the ultimate goal of most of which is simply to get more money for the daily maintenance of the account.
On September 15, European banks had to open their APIs to third-party service providers so that they could write off money and receive information from customer accounts. However, in reality, most of the banks did not do this. And there are two problems here: first, banks are absolutely not interested in the development of this scenario, therefore even large and very technological banks have done everything to formally meet PSD2 requirements, to make the process of initiating payments and obtaining information as difficult and inconvenient for the client as possible. The second reason is that many smaller banks are simply not able to provide a professional and secure connection through the API to their systems, and therefore could not meet the requirements of the European Commission.
Well, it remains to be hoped that the European Commission will not back down from its intentions to liberalize the market for bank transfers and information exchange, as a result of which penalties will be applied to the late banks. And in the near future we will see a new, absolutely unknown direction for the development of fintech and related startups.
Wait and see!
