The Payment Services Directive 2 (PSD2) that is set for final implementation in the member countries of the European Union in January 2018 is a huge opportunity for companies like Roger. From the very beginning, our ambition at Roger has been to change how things work in the financial world. Judging from the attention the directive has gained in the European banking world, PSD2 will allow us to pursue this even more as it fundamentally changes the way we perceive, practice and develop payments solutions.

We started building Roger about a year ago with the anticipation of PSD2 in mind, so we are more than ready to instantly make consumers and companies in Europe feel the direct benefits of the directive once it is finally here.

In this article, we will look at the implications of PSD2 for Roger’s users and at the new possibilities emerging for the fintech sector in general.

What is PSD2?

PSD2, a beast with no less than 117 articles, will essentially make it easier for non-bank financial service providers to read and write access to customer account information so your bank doesn’t just sit on your data without you being able to use it outside of their product world. This will fundamentally change the payments industry, since traditionally, this type of information has been kept firmly and securely by banks. Following PSD2, they will have to give up their monopoly, resulting in increased transparency and security, and hopefully healthier competition and innovation within the European payments market.

As the name implies, PSD2 is the younger sibling of the Payments Services Directive (PSD) established in 2007. PSD laid the ground for a single regulatory framework for payments in the European Union. However, much water has run through the river since. During that time, many new financial technologies and companies have sprouted and placed themselves alongside banks, hereby “disrupting” the established institutions. The need for an updated framework soon became clear, and in November 2015, the revised directive PSD2 was adopted by the European Commission.

Who is it for?

The directive will affect a broad range of players directly: consumers, banks and retailers. It will also offer opportunities for fintech startups like Roger to develop new, exciting applications and features and establish partnerships that, ultimately, will be to the benefit of the consumer. To distinguish between these players, PSD2 sprinkles the European payments sector with a range of obscure acronyms, among others:

Third Party Payment Service Providers (TPPs): In short, the third parties facilitating, initiating or recording payment processes alongside bank and customer. This category covers two sub-categories:

Account Information Service Providers (AISPs): Third parties that collect online information on customers’ payment accounts held with with one or more payment service providers to offer customers a centralized banking platform. While we already see a few brilliant examples of AISPs, PSD2 will make it even easier for new providers — who are not necessarily banks — to consolidate customers’ payment-account information in one place and in this way provide them with a central, financial overview and command center.

Payment Initiation Service Providers (PISPs): Companies that take online payments (often online retailers) and initiate payments, i.e. credit transfers, from a paying customer’s account in a bank to themselves. Traditionally, PISPs use third party technology like card schemes and merchant acquirers to execute this process, but PSD2 offers a shortcut. With the explicit consent of the customer, PISPs can use a token to get direct access to the customer’s payment account in a financial institution. This offers a safe yet more direct interaction between retailer and customer, a more transparent payment process, and almost instantaneous settlement of funds into the retailer’s account.

What makes this payment processing possible is that, with PSD2, the financial institution (e.g. a bank or credit union) acquires the additional title of Account Servicing Payment Service Providers (ASPSP). This means that banks become obliged to enable third party AISPs and PISPs to initiate payments and access account information, though this obviously rests upon the consent of the customer. As if we weren’t already juggling with enough acronyms, this kind of direct third party access to accounts, which is honestly pretty revolutionizing, has deservedly been abbreviated as XS2A (“Acc-Ess-To-Accounts” maybe?).

New terrain

In more technical terms, the new and direct interaction between customer, retailer, bank and third party is made possible by the use of open Application Programming Interfaces (APIs), which, for the uninitiated, can be described as the commands, functions and protocols that programmers use to build software like online bank platforms, accounting software or mobile apps like Roger. We can only celebrate that the incumbent financial institutions loosen up a little and give us a chance to contribute with our innovation and develop our ideas of efficient and beautiful payments handling platforms.

For one, open APIs enable retailers, third parties and banks to communicate directly with each other through XS2A. But what excites us at Roger even more is that open APIs allow fellow web and mobile programmers from different companies to far more easily design and develop new, direct forms of payment interfaces and features that can be integrated across multiple platforms. From Roger’s perspective, consumers and business will experience a range of direct advantages with PSD2. Let’s mention a few:

• With your consent, Roger will be able to transfer money directly out of your bank account to pay your bills instead of only using credit cards.
• As experts in machine learning and data crunching, we will be able to offer you insights from your bank data and bill data that you had no idea about before.
• It will become easier than ever to integrate our document recognition engine with other payment platforms like smartphone apps and comprehensive accounting software.
• XS2A will offer many new opportunities in terms of developing our unique credit scoring system.

Overall, PSD2 will enable us to even better respond to consumers’ increasing demands for mobility, flexibility and usability, also when it comes to developing artificial intelligence technology. At the time of writing, seven of America’s leading banks are already introducing AI-based services, and with PSD2 it is not hard to imagine that European banks will follow suit. This means that we at Roger will be able to use our AI expertise to offer even more seamless experiences to make the lives of consumers easier and less costly.

A safe and innovative future

Naturally, as has been mentioned earlier, this brave new world still rests upon the final consent of the consumer. PSD2 will not enable any sharing of account information if the individual consumer does not allow this. Letting someone else handle your finances has always been a matter of security and trust. But with PSD2, consumers will also have to decide to what extent they will confide in all the newcomers and technologies in the field. On the other hand, banks and more traditional financial systems have always been vulnerable in one way or another. Indeed, having to meet the expectations of the shared security standards defined by the European Banking Authority will establish an even higher standard level of security, insurance and consumer protection than today.

At Roger, we see the coming of PSD2 as yet another reason to continue doing our very best to build trust between our users and us. Like other fintech startups, we will have to make the user experience as frictionless as possible and provide a clear overview of where we, our services and our responsibilities belong in the financial food cycle of the near future.

We have been preparing for PSD2’s arrival for a year already, and are naturally excited about the possibilities it offers to let us create services that are safe, beautiful and convenient to use and, most importantly, make a positive difference in the lives of our users.