EU Directive presents operators with payment market opportunity

September 7, 2015 | Ryan Andrew

The European Payment Services Directive (PSD2) will further open up the payment market in Europe – giving mobile network operators an opportunity to provide an easy, secure payment alternative.

Digital commerce is fundamentally changing how we buy and pay for goods. With great ease, consumers can now browse myriad markets and products from all over the globe and pay for them with the simple click of a button. Digital Commerce is also constantly evolving, particularly since the mass-market penetration of smartphones, which have added even greater choice to the customer experience.

Policymakers and regulators must now adjust the regulatory framework to these changes in order to enable more choice, cheaper services and greater consumer protection.

As part of the push towards a European Digital Single Market (DSM), the European Commission is seeking to modernise the legislative framework for both domestic and cross-border payments by making them easier and more secure.

Central to this is PSD2 – a revision of the original 2007 directive, designed to accommodate the emergence of new mobile and internet payments methods. PSD2 will change the mobile and online payments market significantly. Firstly, it stipulates two new categories of payment service providers (PSPs), ‘payment initiation service providers’ and ‘account information service providers’, which will become authorised and supervised payment institutions allowed access to users’ bank accounts. Secondly, PSD2 aims to strengthen security by introducing strong, two-factor customer authentication standards – which the European Banking Authority has the mandate to define within 12 months of PSD2 Adoption.

The recognition of new players as payment institutions, authorised to access the users’ accounts, means that new players that offer consumers the opportunity to pay online via bank accounts, will find it much easier to enter the market. As a result of this, we can expect these new services to become a much more prevalent part of the mobile and online commercial experience.

But who will consumers trust to act as PSPs in the wake of PSD2? Those in the position to command the market will be those who consumers have a relationship with and already trust with their personal details. As such, Mobile Network Operators seeking to venture further into the mobile payments market may well be perceived by customers as a reliable choice for such as service simply by virtue of having established long-term, trusted relationships with millions of customers all over the globe.

The issue of trust and secure digital identity is more of a serious concern for consumers than ever before, which in itself has the potential to inhibit growth. Operators are well positioned to offer service providers convenient and secure authentication services that reach everyone across borders and use Mobile’s SIM secure element and network information for optimum security.

PSD2 is expected to be voted on in the European Parliament this September – for any enquiries about the GSMA’s work on PSD2, please contact Marina Solin or Harald Boerekamp.

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