Following updates in 2009 and 2012, the latest revision of the Payment Services Directive (PSD) has now come into force.
Often referred to within the UK as Open Banking Standards, the Second Payment Services Directive (PSD2) legislation was formally implemented on the 13th January, two years after being adopted by the European Parliament and brings a number of significant changes to the original iteration of the Directive. Companies affected by PSD2 include all existing Payment Service Providers (PSPs) such as banks, building societies, credit card providers, money remitters and e-money issuers, and also a range of firms that are not currently required to be FCA-authorised or regulated. This includes businesses that provide services that are currently exempt from regulation because of the limited network, ‘digital download’ or commercial agent exemptions, or provide (or plan to provide) account information and/or payment initiation services.
The aims of PSD2 can be summarised as the following:
- contribute to a more integrated and efficient European payments market
- improve the level playing field for payment service providers
- promote the development and use of innovative online and mobile payments
- make payments safer and more secure
- protect consumers
- encourage lower prices for payments
In real terms, the effect of this legislation is that the largest banks in the UK must now release their data in a secure, standardised form, so that it can be shared more easily between authorised organisations online. This data may be as simple as branch locations, or more importantly, information relating to transactions – how much is spent or borrowed for example. This will enable customers to make more informed decisions about their money and which bank or institution they choose to use.
This legislation relates to current account data only at present, but further revisions to the legislation are scheduled to take place over the following two years, such as the inclusion of credit card information and other payment accounts.
As with the original PSD, the FCA is the UK competent authority with primary responsibility under PSD2 for monitoring compliance and enforcement. The non-profit organisation Open Banking Limited is responsible for coordinating the system across the UK.
To find out if your business is affected by PSD2 and Open Banking, and what you may need to do, click the link below.