The way we pay and shop continues to evolve at speed, thanks to rapid advances in technology and positive regulatory changes driven by the EU’s PSD2 (Payment Services Directive). The vision of a safe, secure and simple digital payments landscape is happening all around us. Ann Cairns, President, International Mastercard explains the role of the new legislation in putting Europe at the front of new payment innovation.
Technology and innovation has had a fundamental impact on nearly every aspect of economic activity over the past decade. The payments sector is no different. The result has been a major shift in consumer expectations of how and when they make purchases and how a merchant’s payment experience looks and feels, along with a wave of new players and services entering the market.
Like in many other sectors, the revised EU Payments Services Directive – or PSD2 for short – aims to act as a turbo-charge for innovation. PSD2 looks to ensure making and receiving a payment is both secure and simple and match people’s expectations in terms of service and convenience while guaranteeing consumer protection.
To many, the changes brought about by PSD2 can seem overwhelming. But in several aspects, it is simply a question of how we adapt to recent innovations bringing faster, safer and more convenient payment solutions. With any change comes opportunity. Part of this is a competitive landscape, which will continue to evolve and drive new solutions and new possibilities.
What PSD2 does, at its core, is enable the payments landscape across Europe to continue to evolve and meet the changing ways people pay, while ensuring security, trust and ease is paramount. This transformation is opening up new possibilities for business and consumers through technologies such as contactless, biometrics (e.g. fingerprint or face-recognition) or encryption.
As every device becomes a payment device, we see a world of opportunity opening up. The opportunity to deliver new and improved services that not only meet the core requirements of ease and convenience but also adhere to new, improved standards for high levels of security and consumer protection.
Mastercard is playing a crucial role in this evolving landscape. For example, the company’s recent acquisition of Vocalink, a global leader in bank account-based payments, reflects the growing demand for account-to-account payment options, or to put it more simply, the growing demand for choice in how we pay.
For the entire payments ecosystem new PSD2 rules on open banking (sometimes called ‘access to account’), whereby people can grant 3rd parties access to their bank account information, will contribute to an ever more vibrant payments sector – one where banks, payment providers and third parties will both collaborate and compete to bring new services to market.
At the heart of this, is putting power in the hands of consumers who can grant access to their accounts while at the same time retaining peace of mind. They may want to do that if they are showing they can afford mortgage payments, or want a new telephone contract. They could want to use a technology provider or one of their banks to aggregate account data for them. Crucial to this are the new rules in areas such as enhanced security measures and strong customer authentication.
It is vital that the most robust safety and security technology is deployed in enabling the development of the new ecosystem of open banking interactions between banks and third parties. This represents a big challenge as well as a big opportunity for banks – at Mastercard, we are working closely with our partner banks and retailers to build a smooth and secure open banking ecosystem, which works within the new requirements, while being focused on the needs of tomorrow.
The imperative for all those that operate in this space is ensuring that, as technology evolves and behaviours change, the way we pay is frictionless, convenient and secure. So all of us can enjoy payment options that don’t just meet our expectations but exceed them. Whether this is through face-to-face card payments with contactless, platforms such as Masterpass, or new third-party apps, keeping this core end goal in mind is vital.
A combination of existing expertise and smart innovation that companies like Mastercard bring is crucial to ensuring the future of payments in Europe remains bright. This is not just through the lens of strong anti-fraud and privacy measures, which should underpin any new services, but by combining new technologies and stable regulatory frameworks to leverage experience and new thinking to the evolution of payment solutions.
There are many good reasons to be confident that PSD2 will help us deliver both improved choice and enhanced consumer protection and experience in 2018 and beyond, in a way that is good for consumers and everyone who benefits from electronic payments.