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Open Banking and PSD2 launch this weekend, but what is it and why does it matter?
The Second Payment Services Directive (PSD2) is a fundamental piece of payments related legislation in the EU which provides the legal foundation for what is called ?open banking?. Open Banking, or OB, will enable appropriately regulated companies to give more accurate personal financial guidance, tailored to customers circumstances and initiate payments on the customers behalf, all delivered securely and confidentially.
This matters because it will make internet and mobile payments easier and help customers to manage their finances better. It will also allow customers to better compare deals, giving the customer the opportunity to find the best products for them.
Open banking could also:
So what are the benefits for customers?
We anticipate that the changes under PSD2 and open banking will result in the development of products and services that allow customers to better control and make use of their financial data. The benefits could easily go beyond payments, financial services and e-commerce.
The changes could help open new markets that don't yet exist and encourage new market entrants. Some of these new entrants will offer services to assist those in financially vulnerable circumstances. We don't yet know all of the opportunities that will arise as a result, but we could see huge benefits for customers.
However, all of this won't happen overnight. As with the FCA and other parts of the industry, we see the development of open banking is likely to be a 'slow burn?.
Advice for customers
Your account data cannot be shared with another party unless you agree to it and give your explicit consent. You therefore have to make an active choice to use one of these services.
If you do choose to use these services, as with any new service it is very important that you read the terms and conditions to understand exactly what information they will be accessing and importantly, how they will use that information.
If you do encounter any type of unauthorised activity or payments you don't recognise on your account, speak to your account provider as soon as possible.
You can find more information on staying safe against fraud through UK Finance's Take Five campaign here.
David Song, Principal, EU Personal Finance Policy, UK Finance