Payment services directive II : the impact of open banking on banks : a local perspective

Abstract

Ever since the initiation of the Payment Services Directive in Europe, the payments setting became exposed to an extensive structure of regulation. Several players in this market such as banks, issuers of e-money and acquirers were the ones that had to carry the burden of this directive’s requirement. It also affected commercial operators especially those who offer creative e-commerce stages and enables payments amongst their consumers. Various businesses were not sure whether they fall under the scope of the Payment Services Directive or under its exclusions. Moreover, the exclusions specified under this directive were not evidently explained and led to different interpretations by the Member States. This was the reason why Payments Services Directive was revised and in January 2018 Payments Services Directive II came into force. The revised directive will bring with it new kinds of services and additional requirements for payments service providers that they have to abide by. Therefore, the payments market within the European Union is bound to change. The main objectives of the Payments Services Directive II are to have enhance transparency, increase competition and protection within the landscape of European payments. The purpose of this directive is to strengthen consumer protection, make payments more secure, promote competition and innovation while guaranteeing a level playing field for all market participants, and takes into account those payment service providers that were not regulated by the Payments Services Directive I. The revised directive introduces Open Banking revolution which every bank has to comply with. Open Banking is a development from the present’s closed banking model where the clients’ banks the only control and ownership of client information, into an open model, where various traditional banks, Fintechs and new providers will have the authority to access this information. The scope of this study is to provide an evaluation of several problems that local banks encounters due to the Payment Services Directive II which brings with it Open Banking. It also looks at the benefits that banks will gain through open banking if there is any.