Monday, May 20, 2024

    EDITOR’S BLOG 110118 PSD2 comes into force – and everything is set to change

    It’s not a very happy new year for many retailers. Not only were Christmas sales in the doldrums, but with the tinsel barely put away for another year and they are facing the dual issues of GDPR in May and, more pressingly, PSD2 coming into force this weekend.

    While GDPR implementation has a few more months to run, PSD2 is now effectively here. And retailers and other commerce organisations seem woefully unready – in many cases totally ignorant of what it is and what it means.

    New research from independent technical consultancy Consult Hyperion and tech PR consultancy CCgroup, reveals that major UK retailers are, in Consult’s words “unaware, unprepared and paralysed” ahead of the Second Payment Services Directive (PSD2) set to go live on January 13th.

    Almost half of them are unaware of PSD2, and of those that are, 67% aren’t ready for it. A third have no idea what impact it may or may not have on their business.

    The telemedia industry is, thankfully, much more aware of what PSD2 can do – the ‘open banking’ regulations opening up all sorts of new payment opportunities, not least the ability to use direct carrier billing (DCB) as way to pay for a raft of new things, such as car parking and tickets.

    While there are huge impacts across the while payments ecosystem, what it really means is that payments are going to change. Retailers are going to be able to do all sorts of new things with the payments data that they own and telemedia companies will be able to use DCB as part of a range of other services. In effect it brings about the ‘uberisation’ of payments – burying payments within other processes and making it all very subtle.

    Perhaps the most significant upshot of PSD2, however, will be the way in which it propels things like mobile payments – and payment by watch, fitbit, jewellery and more – into the mainstream. Anything that makes new ways to pay more prevalent can only be good news for payment service providers and telemedia companies.

    And it couldn’t happen at a better time. Another study out this week finds that mobile payments are becoming more popular in the UK, but are still far from mass adoption. According to eMarketer’s latest proximity mobile payment forecast, just over 22% of UK smartphone users will use a phone to pay for goods and services at the point of sale (POS) in 2018.

    In China 77.5% of smartphone users are doing it. Within Europe, the UK’s smartphone penetration rate will rank behind Norway (23.3%), Sweden (33.8%) and Denmark (38.9%) in 2018.

    One reason why the UK is lagging behind may be the proliferation of contactless card technology. Banks in the UK began issuing such cards as early as 2007, while Transport for London’s adoption in 2014 further bolstered consumer usage.

    PSD2 could well see this shift, putting the onus of the device as the place to manage and conduct payments. After all, this is partly what the open banking elements of PSD2 are designed to achieve: to make payments more flexible and open to manage and to open up the world of money management and payments to new providers and services that are more customer friendly.

    Banks are already getting in on the act – keen to not be usurped by new entrants and other players. In Holland, RaboBank is creating its own ‘mobile ecosystem around mobile payments with a rich choice of value-added services, as it moves its customers from a SIM-based m-payments model into the cloud – and becomes one of the first banks to tap into what PSD2 allows them to do.

    This is but the first step. For consumers, the world of payments is set to open up like a spring flower – but only those companies ready to tap into this shift. Are you?

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