How much do you know about the European Payment Law PSD2?

On 19 February 2019 the new European Payment Law PSD2 (Second Payment Services Directive) came into force. This new directive allows financial providers to offer entrepreneurs like yourself new payment services, namely the opportunity to give banks (other than your own bank), businesses or financial institutions access to your payments account. These third parties will then be allowed to access your account information via your own bank, make a payment on your behalf or check whether you have enough money in your account to cover your upcoming expenses. This can work both ways: thanks to this new law, you might be able (with the client’s permission) to see the balance of their payment account. This new directive will make it possible for financial services providers to offer new ways to pay in store or online – for example, instant payments (see last paragraph).

What is a payment service?

Payment initiation services manage business transactions on your behalf. These services ask your customer to give permission to withdraw money directly from their bank account in order to pay for an invoice or a purchase. The money is then transferred via the service provider to your business’s bank account. The reason this is convenient for your clients is that by granting permission to these services they no longer have to pay surcharges for using a credit card, making a bank transfer, a direct debit or an IDEAL transaction, which currently apply in most EU countries. 

Why was this new law introduced?

The European Union introduced PSD2 to increase competition and innovation in the European financial transactions sector. If businesses are given the opportunity to offer payment services, it means that you get to choose how you manage your payments. The Consumer and Market Authority (CMA) has listed the reasons behind PSD2:

• Improve competition within European payment market;
• Boost innovation in financial transaction services;
• Better safeguard consumers;
• Ensure secure transactions;
• Contribute to creating one European payment market.

Access or no access

You can decide whether you want to give a third party access to your payment account. If you decide not to give access, nothing will change. If you do grant access, you can revoke this permission at any time. If you do give permission, your bank is allowed a period of 90 days to share your transaction data with a third party. This external party must have a license from the DNB or from another supervisory institution within the European Union. Providers will not be able to access your account data without restrictions: they may only use, access or download the data necessary to perform the services for which you have granted permission.

Is PSD2 safe?

Security and privacy are very important, which is why PSD2 makes provisions to ensure that when you grant access, your bank account is kept secure. In addition to that, according to PSD2 new payment institutions must have a license from the relevant supervisory bodies in the Netherlands or in the European Union. Additionally, certain minimum technical standards apply in terms of how transactions and communications between the bank and the third party are carried out. You have complete control over whether the external party gets the permission to access your account data, and what data you provide. This useful checklist might help you to protect your account:

• A third party may ask you to use the security codes for internet banking. Never give up your pin code, password, ID or user name.
• Ask yourself: do you trust the party that requests the permission?
• If you are in any doubt, do not grant access.

Bringing exciting changes

As a result of this new regulation, starting from May ‘instant payments’ will be available. This means that money will be transferred immediately, 24/7, 365 days a year. Business owners will be able to get the money from a purchase in their bank account within just a few seconds. How convenient, right? As a retailer, you can encourage your customers to use instant payments by offering something in return, such as fast or set time delivery. 

You will find more information on this subject on the website www.ukfinance.org.uk.