PSD2initiativet

The PSD2 initiative, or Payment Services Directive 2, is a European Union directive that came into effect in January 2018. Its primary goal is to regulate payment services within the EU and the European Economic Area. PSD2 aims to increase competition, innovation, and consumer protection in the retail payments market.

A key aspect of PSD2 is the introduction of strong customer authentication (SCA). This requires payment service providers to implement multi-factor authentication for most electronic payments, adding an extra layer of security to protect against fraud. This typically involves at least two independent elements to verify the customer's identity.

Furthermore, PSD2 mandates that banks open up access to customer account data to third-party providers (TPPs) with the customer's explicit consent. This is achieved through Application Programming Interfaces (APIs). These TPPs can be payment initiation service providers (PISPs) or account information service providers (AISPs). PISPs can initiate payments on behalf of a customer, while AISPs can access and aggregate account information from different banks.

This opening of access has fostered the growth of FinTech companies and innovative payment solutions, leading to new services like payment aggregation and streamlined payment processes. However, it also presents challenges for traditional banks in adapting their infrastructure and security measures. Overall, PSD2 has significantly reshaped the European payments landscape, promoting a more open and competitive market.