What is PSD2?

We explain what the new European payment services directive is all about.

The PSD2 regulation is not "new." This is an update to the first Payment Services Directive (or PSD1), which was passed in 2007 and sought to create a single payment market in the European Union. This would help promote competition, innovation and efficiency. In short, it sought to bring about a change in the relationship between money and new technologies. 

After this initial step, a new Payment Services Directive was approved in 2015. What changes does it make with respect to the previous version? The new directive, aimed at both consumers and businesses, fosters the development of a single, more integrated and efficient payment market, one in which the role of both parties is enhanced by guaranteeing easier and, above all, safer electronic payments, and in which consumers are in complete control of their money and their information. 

Similarly, and in order to achieve a more integrated and unified European market for all participants, it requires financial institutions to provide information on their customers' accounts (with their prior approval) to the TPPs, with the security of their data being guaranteed. 

A step forward that removes this wall that, before now, these TPPs had to break through to enter this market. The wall that kept new players from entering the game has fallen. This brings with it huge benefits to consumers, who now have available to them more payment services and options, all of them regulated by the same, familiar rules and featuring stringent security measures to protect their money and data.

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Main advantages of PSD2

There are two key points to this new PSD2 regulation: bringing about new payment methods and making them safer. In the area of protection, and in an effort to boost consumer confidence in electronic payments, it establishes new authentication minimums for users, with the SCA (or dual authentication) taking on added significance in this regard. This requires using 2 or 3 of the following factorssomething the user knows (such as a password), something the user owns (such as a smartphone) and something the user is (such as a fingerprint or face). The first one will no longer be valid. Now, two will be required (dual authentication or SCA), with the use of biometrics being one of the most complex elements to crack, since it is unique to each person. 

With regard to payments, the current process is relatively complex. Businesses have to contact intermediaries, such as electronic payment providers, who are responsible for contacting the card company (Visa or Mastercard, for example) to charge the payment to the customer. 

With the passage of PSD2, new payment methods and services are possible thanks to the arrival of new participants. These new services are tailored to the various preferences of customers, while offering the same level of security. Likewise, businesses will also benefit from these changes, since they can now offer a wider variety of payment options to their customers.

BBVA and the PSD2 regulation

At BBVA, we share in the spirit of the PSD2 regulation. Firstly, when it comes to innovation in online payments, we were among the first when we opened our platform for third parties so that, through open APIs, they could offer new features to make life easier for our customers and help them make better decisions, as we had already done, some time ago, with our Aggregation Service, which allows our customers to have the accounts and cards from all their banks in the same place, so they can keep better track of their finances. 

Secondly, and also in keeping with PSD2, we want to offer consumers the highest security that we can, and to do so, we are working on two fronts: with invisible or highly sophisticated measures such as biometric iris recognition, or turning the smartphone into a remote that gives us control over our accounts and cards. The latter even includes a panic button you can use to immediately block them if you notice something suspicious.

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The present and future are digital

The PSD2 regulation will affect banks, businesses and consumers throughout Europe. However, everyone will experience it differently, depending on how their bank has approached the digital transformation, which will determine the experience they can offer their customers. 

At BBVA we always try to lead the way, leveraging technology and big data to benefit our customers. This allows us to offer our customers a good experience and ease the transition to the new PSD2.

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