In this blog post, our CEO, Jan Ludik, explores the benefits that PSD2 brings to various stakeholders in the European financial and fintech ecosystem.
PSD2, or the Second Payment Services Directive, is a game-changer for the European fintech and finance community. This regulation, which came into effect in 2018, aims to increase competition, improve security, and enhance customer protection in the payments industry.
“PSD2 has paved the way for a more open, collaborative, and customer-centric payments landscape,” says Traderoot CEO. Jan Ludik. “By enabling third-party access to account information, businesses can now offer a more holistic view of the customer’s financial position, which can lead to better financial planning and decision-making.”
Benefits for Payment Service Providers:
Payment Service Providers (PSPs) in Europe stand to benefit immensely from PSD2’s implementation in the following ways:
- New Business Opportunities: The introduction of PSD2 offers new business opportunities to payment service providers (PSPs)who can offer account aggregation services, initiate payments on behalf of customers, and provide value-added services such as fraud prevention, financial planning, and loyalty programs.
- Fast-Tracking Innovation: PSD2 is driving innovation and competition in the payments industry, opening up new partnerships and revenue streams for payment service providers.
- Enhanced Security and Reliability: PSD2 provides a more secure and reliable payments ecosystem, which in turn leads to higher customer satisfaction and increased trust in payment service providers.
- Increased Efficiency and Cost-Savings: Encourages standardisation and interoperability among payment service providers, leading to a more efficient and cost-effective payments infrastructure.
Benefits for Financial Service Providers, Banks, and Fintechs:
Aside from the benefits to PSPs, other corporates such as Financial Service Providers (FSPs), banks and Fintechs also benefit from PSD2 in the following ways:
- More Informed Planning and Decision-Making: PSD2’s Open Banking capability enables third-party access to account information which assists Financial Service Providers (FSPs), banks and fintechs to make more informed strategic, business and financial planning decisions.
- New Business Opportunities: Increased access to information opens up new opportunities for FSPs, banks, and fintechs, to develop innovative products and services that can leverage the customer’s financial data to offer personalised experiences and insights.
- Transparency, Collaboration and Customer-Centricity: PSD2 paves the way for a more open, collaborative, and customer-centric payments landscape.
Benefits for Retailers and Merchants:
Retailers and other merchants sitting on the frontline of the payments industry are major benefactors of PSD2.
“With PSD2, retailers and merchants can benefit from lower transaction costs and enhanced security,” says Ludik, “which can lead to a more profitable and secure business environment.”
Some of the benefits include:
- Improved Security: PSD2 legally requires banks to offer two-factor authentication (2FA) for online payments, thus offering increased security and reducing the risk of fraud.
- Financial Benefits: One of PSD2’s biggest benefits to retailers and merchants is the ability to bypass costly card processing fees by initiating direct bank transfers from customers’ accounts, which is particularly beneficial for high-ticket items.
- Increased Profitability and Security: Benefits from lower transaction costs and enhanced security will lead to a more profitable and secure business environment for retailers and merchants.
Benefits for Consumers and Shoppers:
Most importantly, consumers and shoppers benefit from the transparency, security and reduced costs due to PSD2.
“PSD2 has put the customer at the center of the payments ecosystem,” says Ludik. “With greater transparency and competition, customers can benefit from a more personalized, convenient, and affordable payments experience.”
Consumers and shoppers benefit from PSD2 in the following ways:
- Greater Control: One of the key focuses of PSD2 has been on consumer rights, with the regulation giving customers greater control over their financial data by choosing which third-party providers have access to their account information.
- More Informed Financial Decisions: PSD2 provides people with greater transparency, enabling them to make more informed decisions about which products and services they use.
- Better Service, Better Products, Bigger Savings: At its core, PSD2 encourages competition among payment providers, leading to lower costs, better services, and more innovative products and services for end users.
- Personalisation and Customisation: Great access data means that PSps and FSPs can create a more personalised, customised, convenient, and affordable payments experience.
PSD2 has brought benefits to stakeholders across the payments sector’s value chain by encouraging innovation and collaboration. Payment service providers are able to benefit from new business opportunities, increased innovation, and a more secure and reliable payments ecosystem. Furthermore, PSD2 has provided benefits for retailers and merchants by reducing costs and improving security. But perhaps most importantly, PSD2 has empowered customers by giving them greater control over their financial data and encouraging competition among payment providers. We believe that this is just the beginning of a new era in payments, where innovation and collaboration will be the driving force behind a more inclusive and sustainable financial system.
Discover how Traderoot’s suite of PSD2 compliant Fintech payment solutions can enable merchants and retailers to cater for a wide range of payment types, enhancing customer sentiment and maximising revenues. Learn more about our Payment Services Provider – Channel, Payment Services Provider – Acquirer, and Payment System Operator Products on our website or email sales@traderooteurope.com and let’s start perfecting commerce.