Fintech: How PSD2 Will Change the EU Market

The Payment Services Directive 2 – PSD2 – is set to be fully implemented until the end of 2019, as banks must comply with all the regulations of the directive by September.

Although the impact cannot be measured as off now, we can see some of the changes happening already as bigger players are already taking notice of the impact the directive might have on the financial market: global fintech investment has doubled to €43 billion in 2018.

The goals of the directive

The professed goals of the directive include boosting a single market of payments for the UE, the reinforcement of safety, through the use of consumer authentication methods which comply with European standards and the accountability of payment service providers in the event of unauthorized payment transactions, more competition and innovation, by opening up the market to non-banks and innovative fintechs, and a more convenient experience for the customers, as a more consumer-centric view of the market, will be emerging.

The Shift in the Market

There will be several factors reinforcing the directive in creating a unified European Market:

  • Bigger market: as the market shifts from several autonomous markets into a single bigger one, it will become more attractive to new players and new services.
  • Scaling up: It will be cheaper for banks and other services to scale and operate in several countries when their legal frameworks are homogeneous which reduces development and compliance costs.
  • Savvy consumers: As the competition in the European market increases, so will the transparency in financial services and prices offered by European banks, which will lead to better-informed consumers, that will lead to considering foreign banks.
  • Consumers are increasingly more open to online and international shopping. This behavior can influence consumers’ banking behaviors as well.

In a nutshell, the European financial markets will change from domestic banks (the current status quo) into an open and European market, where European and international banks and non-banks will be able to offer their services.

Read more about the Payment Services Directive 2 (PSD2) here.