Madrid, 25th May 2020
PSD2 obliges banking institutions to harmonise electronic payment systems in the eurozone through Open Banking
It will strengthen the security of transactions by reinforcing security measures for identifying and authenticating users
The European Payment Services Directive, better known as PSD2, which came into force on 14 September 2019, updates the current PSD which regulated the payment services market in the eurozone and which had become obsolete due to emergence of new operators, making its renewal more than necessary.
The purpose of this new legislation is to guarantee online payments as well as prevent fraud by establishing requirements for its application. Financial institutions are obliged to open their payment services to third parties who are authorised by users. These third parties are external payment providers, known as TPP (Third Party Providers), and PSD2 establishes two different types: The PISP (Payment Initiation Service Providers), which enable payment by direct bank transfer where before you could only use a card, and the AISP (Account Information Service Providers), which collect and store account information so that users can have all their bank details in one place.
This legislation, according to Antonio García Rouco, managing director of GDS Modellica, “will oblige financial institutions to work as an open bank – Open Banking. They will be obliged to give third parties access to customer accounts with the aim of harmonising payment services in the eurozone.” He went on to say, “It aims to strengthen the security of transactions, encourage innovation in the financial sector, improve the customer experience and demand the sector to change its security methods and access to data and transactions”.
There are two key themes to this new legislation; The first is the sharing of information, liberating users’ financial data and prior authorisation to use such data to encourage competition in the sector. The second is improved security of transactions by implementing reinforced security when identifying and authenticating users who make payments with the aim of guaranteeing and boosting competition, thereby adding value. The legislation also aims to improve payment security and efficiency, provide greater consumer protection, strengthen European payment services by standardising the regulations of different EU countries and continue with innovation and adaptation to new technologies in the financial sector.
This new regulatory framework provides many benefits to the development of the electronic payment market in the European Union. It increases competition in the sector, with new players offering users more choice and competitive prices, whilst also strengthening the security of operations with double authentication to reduce fraud and make transactions safer.
According to GDS Modellica, the application of this new payment legislation opens a wide range of possibilities in the financial sector by helping to create a more integrated European payment market, which is more secure and protects consumers. It directly affects financial institutions, and for this reason, they will need to make changes to their security and methods of accessing data with regards to opening their infrastructure, Open Banking and the improvement of security.
In this context, with the aim of aiding the digital transformation in the financial sector and enabling the arrival of new competitors in accordance with the new payment legislation (PSD2), GDS Modellica supplies software, decision analysis and automated machine learning techniques for managing risk, combatting fraud and building profitable relationships between businesses and customers. With respect to the management of specific risks in the finance industry, their solutions help to steer development and implement actions, applying solutions that are adapted to individual needs. In keeping with this last point, the managing director of the company says, “at GDS Modellica, we offer an improved experience for clients through our careful attention to their needs coupled with our broad customer experience as industry leaders. Our tools can be personalised to offer complete solutions and completely optimise their current applications with the necessary components.”
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