PSD2 – a Challenge or an Opportunity?

PSD2, which comes into effect this weekend, is an evolution and extension of existing regulation for the payments industry. It aims to increase competition in the payments industry, bring into scope new services and enhance customer protection and security. There are businesses which have chosen to overcome it by introducing a service fee model to their transactions ahead of the January 13 drop date, though this may not work for all industries. We should look at PSD2 positively and consider the opportunities it presents. For operators who haven’t got large legal teams, moving card payments from what was a profit centre to a cost centre can seem daunting. Breaking this down into achievable steps can set a good foundation to make these small percentages back. We would recommend that merchants:

• Review their payment model. Examine what interchange, scheme fees and processing fees are being paid and identify the opportunity for negotiation
• Explore new services to help their transition. The market share of card payments is expected to reduce in favour of new instant bank transfers enabled by PSD2 APIs
• Consider whether their payment strategy is flexible enough to support growth. For instance, could payments be offered in local currencies, and settled in any currency? Consider how consumers may want to pay for large-ticket items, like paying by monthly instalment
• Look at back-office efficiencies like the collection process, whether the business receives above average failed authorisations and how many hours are used in manual reconciliations

Ultimately, PSD2 claims to champion frictionless payments, which can only be a good thing for the customer. This is the beginning of a new customer journey that is set to evolve over time as demand for new payment methods continues to grow. Stepping back and looking at the wider payments picture is part of the adventure. Simon Chandramani, Sales Director, Paysafe