Understandably fintechs had high expectations of PSD2 prior to its implementation. Paysafe was one of the first third party providers to have its PISP license approved, in anticipation of the transformation to the payments landscape. However, as we reach the six-month anniversary of PSD2, it is fair to say that some of wind has been taken out of its sails. There is still an unshakeable belief in the payments community that PSD2 will have the impact it is earmarked to eventually, but progress since the implementation date has been slower than expected.
The costs of overhauling legacy technology to permit open API integration is significant, and the result of this forced investment is a much lower level of control over the customer relationship, so it comes as little surprise that the appetite for embracing PSD2 hasn’t been particularly strong on the part of banks. On the PSD2 launch date in January, many household name banks were not even ready to comply with the legislation at all, and actually there is no incentive for banks to move beyond the minimum requirements of the legislation unless directed to otherwise.
One of the fundamental hurdles that needs to be overcome for Open Banking to flourish is consumer and business appetite for adoption. Currently consumers do not have any great visibility on what Open Banking is or its capabilities; familiarity will come through the applications and products themselves that are developed using API technology, not merely the concept.
There is now a new date in the diary for stakeholders in PSD2: September 14 2019. That is the banks’ compliance deadline for the European Banking Authority’s Regulatory Technical Standards (RTS) on Strong Customer Authentication (SCA) and Secure Open Standards of Communication (SCS), a directive that clarifies how banks should be permitting access to customer data.
There are still question marks that need to be addressed regarding the exact obligations the RTS will place upon the banks. The banks are working with fintechs on what is in scope, but there are significant areas which may be out of scope for the Open Banking Implementation Entity. This has to be fixed if Open Banking really is to be successful. The question is, who will own this to ensure success.