Payment Service Directive II and Its Implications

Abstract

The EU required member states to implement the new Payment Services Directive (PSD II) by January 2018. The European Banking Authority (EBA) will provide important final guidance on areas such as security during 2018, which will need to be implemented over the following couple of years. The increase in mobile and Internet banking and the failure of the original 2007 first Payment Services Directive (PSD I) to develop cross-border payment services encouraged the development of the revised Directive. The EU also took the opportunity to assist the development of new payment services, which may, in due course, disintermediate some of the traditional payment arrangements including, for example, those provided by credit card companies, and to reduce the cost of payments services for, primarily, businesses. It will pose challenges for banks and present opportunities for both new FinTech operations and large firms such as Apple and Amazon. The full benefits of the new Directive will only be gained if a critical mass of customers see the value of the new services and trust the firms and processes involved.