It is midnight. Do you urgently need a bit ‘of cash, but you have no cash with you. Then take your phone, open the app of the bank account from which you want to withdraw the money and select the amount you need. Enter the ATM disposable PIN you received via SMS and withdraw money. And the mobile app also has guided you to the nearest ATM. Simple, convenient and secure. This is just one of the scenarios in which the Directive on payment services 2, that is, the Payment Service Directive 2, commonly called PSD2, will help to make our lives easier. In fact, the PSD2 is going to revolutionize the way consumers interact with banks, shops, telecom operators, hotels and other service providers. But what is it? The first PSD has been initiated in the European Union in 2007, to provide a legal framework for all payments made in Europe, in order to increase the speed, efficiency and ease of payment services. The PSD2 part of this, aiming to increase innovation and transparency in the European payments market, improving the security of internet payments and access to bank accounts. Not only the PSD2 also offers uniform rules on competition between payment service providers, both among the traditional ones is among the newest, as the scope Fintech, and between entities such as online retailers and telco. Because in today’s app economy more and more consumers are managing their financial transactions through dedicated mobile app, it is useful to look at five ways the PSD2 accelerate innovation in payments and will transform customer experience through mobile applications.
- More comfort
The PSD2 puts the consumer, and not the transaction, at the center of the payment process, giving a simple vision and complete control over their financial assets, regardless of which institution managing the account. For example, when we buy online, we share your card details to the merchant, and other entities such as PayPal or MasterCard. In turn, these get payment from our account through intermediaries. With PSD2, we will purchase online without sharing the details of the card on the Internet, in a secure and trusted. Our transactions are guaranteed and protected by strong authentication and guided centrally, thus becoming faster and cheaper.
- secure Payments
Two-factor strong authentication is a key component of PSD2, used to validate the user of a service fee or transaction in real time. Ultimately, it will create a robust environment for payment services throughout the EU and reduce fraud without burdening legitimate users. In addition, the peer-to-peer payments become a reality through the PSD2 framework led by the API: in this case, the consumer will be able to select a contact on their mobile device and make a payment without knowing the specific details of the bank account.
- Innovative ways to manage the funds
With the PSD2, consumers will benefit from a comprehensive view of their accounts directly from their mobile device. One authenticate with their bank will provide a unified view of financial services available, as well as a complete picture of the historical financial situation, plus the ability to easily add additional accounts using the same authentication.
- Targeted Financial Deals
With PSD2, consumers will have the opportunity to receive personalized financial deals such as loans or investment advice. The directive also calls for banks to offer Third Party Providers (TPP) secure access to customer accounts, provided they have the consent of the customers themselves. Just as banks, even the TPP will use their business intelligence to provide tailored financial offers consumers.
- Lower commissions on cards
The implementation of PSD2 may result in the elimination of costs related to merchants processing transactions using payment cards, and they are benefits that can be passed directly to the consumer. In fact, through the directive, online payments will go to a “push” model, with money taken from a customer via API and transferred directly to the account of the merchant.
The key to success is in the PSD2 API
With PSD2, IT becomes an increasingly powerful tool for new business models. Banks will need scalable solutions management API to provide secure access to accounts and to connect third-party payment aggregators with their systems. In addition, they will need security solutions to provide the levels of security required by PSD2 without compromising the customer experience. These technologies must be able to scale on demand, as it is widely expected that there will be significant growth in the volume of transactions that financial institutions will be required to manage in the new scenario. In summary, the PSD2 will change the landscape, making it the most secure payments, increasing consumer protection and helping lower costs for payments. However, the directive is both a business challenge is an IT challenge: the technical dimension must be considered in the current strategic debate Fintech industry in response to this important directive. In this regard, CA Technologies has created a demo app that shows the way in which consumers will benefit from PSD2 This short video shows some of the key advantages for the consumer.
Antonio Rizzi, CA Technologies Sr. Director, Practice Services