Sunday, May 19, 2024

    PSD2: The good, the bad and the fragmented

    The arrival of The Second Payment Services Directive (PSD2) across Europe opens up all manner of more open financial services – not least the ability to pay for some things with the mobile phone bill. But it isn’t all good news, finds Paul Skeldon

    PSD2 opens up banking to all sorts of new players – and part of that has been to make charge to mobile carrier billing something that could well touch the mainstream. In further articles, we look at ticketing and parking services – two of the things that PSD2 is going to open up across Europe – but first we take a look at what PSD2 means for the market.

    The Good

    One of the main things PSD2 brings is open banking. While that may not sound like it means much to the telecoms industry, it is significant. Not only does PSD2 and open banking make it possible for carrier billing to be more widely adopted across a raft of services, opening up many telemedia companies to delivering new services such as ticketing and parking, innovative content services and more, it also throws up a huge shared load of financial data, usually reserved for the banks.

    “For years banks have sat on the most valuable asset to any business: the infinite transactional and financial data of customers that essentially define individual’s tastes, preferences, budgets and – crucially – their requirements for building and planning their lives,” says elicia Meyerowitz Singh, Co-founder & CEO, Akoni Hub. “High street banks – reluctant to share their oligarchy of power, held on tightly to this data – unwilling to share it with others – or use it to enrich their consumer experience and put them at the heart of their business model.

    One bank leaping on what PSD2 offers is Dutch RaboBank. It 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.

    “Rabo Wallet” users can therefore not only manage their mobile payment cards and make mobile payments – they can also instantly activate other services like parking and a storage function for customer shop and loyalty cards.

    The Bad

    But while PSD2 offers a raft of advantages to consumers and merchants, many ecommerce retailers are still very much in the dark about what it means.

    Research by Consult Hyperion, reveals that major UK retailers were unaware, unprepared and paralysed by PSD2’s implementation. It found that almost half of them were unaware of PSD2, and of those that did know what it was, 67% weren’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. Research by eMarketer 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.

    The Fragmented

    One of the biggest problems with carrier billing and what PSD2 has opened up to a wider world is that it can be very fragmented, warns Rory Maguire, MD, aimm, the industry trade body that worked with the UK Treasury to make PSD2 something that would benefit operators and merchants.

    “The first observation is that the Telco’s payment product, unlike any other payment product operates in a fragmented way – with telcos’ in-house lawyers having different views on how to implement the restrictions,” he says.

    “Despite being members of the one EU trade association that knows this regulation inside out, the lawyers won’t consult. The result is an intermediary layer and merchant layer trying to navigate multiple rules across their network partners. We are hoping that time and some persuasion will iron this out.”

    This means that there are going to be different interpretations of the riles governments across the EU in response to pressure from incumbent telcos, warns Maguire. “While this is good news in-country, it again leads to fragmentation for cross country intermediaries,” he says.

    But we shall have to wait to see how ‘good, bad or ugly’ it gets as it is rolled out. The opportunities for ticketing and parking are already being talked up and are in action in many places. As we have seen already, Fonix has lept on the potential of mobile ticketing under PSD2 and launched mobile tickets to help people cross the solent on the Cowes Floating Bridge [a ferry]. This will, hopefully kick start the deluge of PSD2 driven charge to mobile services.

    “This case history will encourage other transport and toll road companies to look at their ticketing facilities,” hopes Maguire. “We hope to see entertainment ticketing emerging soon and we are working across entertainment ticketing companies to realise this opportunity.”

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