The wide-ranging legislation will affect all institutions that control payment services, including banks and building societies, but is intended to benefit consumers and allow individuals better security and control over their own data.
The UK’s response, called Open Banking, is legislation sponsored by the Competition and Markets Authority, which required the nine largest current account providers in the country to implement Open Banking.
Developing the Open Application Programming Interface (API) standard will enable customers to consent to allowing third parties safe and secure access to their current accounts; to either gather transaction data or initiate payments on the customer’s behalf. This could have a significant impact on the mortgage process.
Bigger priorities
However, Robert Sinclair, AMI CEO said the PSD2 was interesting but not the biggest piece of regulation for the mortgage broker market in the next 12 months, citing instead the FCA competition review expected out in late October or November and the imminent report on the ageing population as intermediary priorities.
“However, it might be that some intermediary firms want to use the data changes to speed up their own application processing times and invest in technology to help them do that,” said Sinclair.
“Large firms, networks or technology companies might also use this regulation to sell faster processing solutions into the broker marketplace.”
Sinclair explained that with consumer consent, advice firms in the market may also be able to harness consumer credit scores and payment profiles to better marketing effect. He added that the UK is the only country allowing PSD2 before the legislation targeting security, the General Data Protection Regulation (GDPR), which becomes law on 25 May 2018, which means consumers must be cautious about who they hand data to.
Promote innovation
Meanwhile, the FCA said as well as promoting innovation, PSD2 aims to improve consumer protection, make payments safer and more secure, and drive down the costs of payment services.
More services will be brought within the FCA’s scope by PSD2, including account aggregation services which aim to help consumers manage their finances by bringing all of their bank account data together in one place, and services that allow consumers to make payments in different ways online, without using a credit or debit card.
Christopher Woolard, executive director of strategy and competition at the FCA, said: “Competition in retail banking and payments is vital to UK consumers and the wider economy. PSD2 builds on this by giving consumers more choice around how they manage their payments and bank accounts. It also brings in some important protections for consumers and seeks to increase the security of payments.
“Firms should make sure they know what’s required of them to be ready for the new regime. We will continue to monitor closely whether competition in the market improves in the interests of consumers,” Woolard added.
Complaints handling
PSD2 also introduces a number of new requirements around how firms treat their customers and handle their complaints, and the data they must report to the FCA.
It requires existing payment institutions and e-money institutions to be re-authorised or re-registered.
The watchdog said: “Firms should consider whether they now need to seek authorisation or registration because of changes to the scope of regulation made by PSD2. This includes businesses providing account aggregation or online payment initiation services. Applications will open on 13 October.
For more, see the EU Directive, the approach document out today and the Payment Services Directive, first published in July this year.
