What You Should Know About Open Banking and PSD2
New banking models focused on customer interaction, service, and engagement are set to change the financial services industry. This industry is consistently pressured to abide by new policies and regulations put in place by governments and regulatory bodies. One such regulation is the Revised Directive on Payment Services (PSD2) which will soon go into effect across the European Union as well as the Open Banking Mandate which will be enforced across the United Kingdom.
Both directives will require banks to give direct access to bank customers’ financial data to third-party financial services providers. To ensure banks comply with Open Banking and PSD2 guidelines, they must first ensure they meet a series of technical requirements involving customer authentication, secured programming of application interfaces, and customer consent procedures. Another element that will play a critical role is digital identity management in which banks will have to verify customer identities.
PSD2 was initiated after changes proposed by the European Commission in 2013 to the existing EU Payment Services Directive were approved. PSD2 is designed to improve customer choice while promoting competition and acceptance of digital modes like online and mobile payments. Open Banking and PSD2 will go into effect in January 2018. Strong authentication provisions will be enforced in October 2018.
With the new regulation, the ability to access and share customer data will be more secure through bank APIs and banks will be forced to adhere to these new compliance regulations. As customers are demanding more control of their data, more innovative services are being put in place to ensure that happens.
For customers, there will be simpler and more convenient mode of communication with their bank to ensure they receive tailor-made products and services. While new regulations might tend to come across as more of a burden, the direction toward more customer-centric service means that it is likely a blessing in discuss for both companies and customers.
Now you might be asking, “Who will deliver these new types of third-party services in PSD2 and Open Banking?” We have the answer for you, but you will need to click the link below to find out.