Merchants are asking questions about PSD2. Rightfully so—the initiative is transforming payments across the European market. With these new regulations taking place, what are some of the payment implications and what do they mean for businesses and consumers?
There has been a lot written around PSD2 and the various implications it may have for running your business in the European marketplace. For most, it means big changes are coming but who actually benefits from some of these changes? And what specifically is XS2A?
Access to Accounts (XS2A) is one of the most transformative parts of PSD2, giving regulated Third-Party Payment Providers (TPPs) access to consumer and business bank accounts, if the account holder gives their consent. This kind of access was previously restricted to issuing banks or unregulated providers using ‘screen scraping’.
“XS2A has potential benefits for both consumers and merchants,” according to Charles Damen, senior vice president of payment strategy at Worldpay. “For merchants, the cost of taking a bank payment is typically a lot lower than it would be for using cards, the funds are available faster and fraud is minimized.” He added, “Consumers, on the other hand, will immediately see that they’ve paid, and the money will come directly from their bank account, so it’s easier for them to manage and control their spending.”
This change (also known as Open Banking in the UK) will lead to greater innovation in the payment industry, with new consumer experiences based on Account Information Services (AIS) and Payment Initiation Services (PIS).
For example, consumers could see all of their accounts across banks in one place, or make fast, secure payments for internet purchases by bank transfer without the need for a credit card (60% of the EU population don’t have a credit card1).
XS2A can benefit merchants in two key ways:
- Access to bank data will enable the creation of enhanced data insight tools, allowing you to make better decisions and offer a more seamless payment experience.
- Consumers will be able to pay for online purchases directly from their bank account, reducing your processing costs and chargeback risks.
Consumers – even those without cards – can now give you more direct access to their accounts to pay for goods and services, making your payments processing less costly, reducing your chargeback risk and enriching your consumer data.
While many of the new services based on XS2A will be launching soon, similar direct payment services based on bank transfers are already popular with European consumers.
For example, iDEAL in the Netherlands and SOFORT in Germany work in much the same way as XS2A. Merchants selling in the Netherlands use iDEAL to meet the payment preferences of consumers, and to offer a low cost and secure payment method. Like other direct payment methods, these transactions are irrevocable and confirmed immediately, so merchants are assured they’ll receive the funds.
It’s because of these features that iDEAL is the most popular payment method for online transactions among Dutch consumers, with a 57% market share in 20172. It’s the kind of success XS2A could well emulate across the whole of Europe.
1. European Commission, Press Release, Payment Services Directive: frequently asked
questions, 2018 http://europa.eu/rapid/press-release_MEMO-15-5793_en.htm
2. Ecommerce News, Nederland, 2018 https://www.ecommercenews.nl/ideal-qr-jaar-iedereen-mogelijk/