A new EU banking directive, PSD2, comes into force Saturday, making online transaction costs for credit cards a thing of the past. But the directive could also have greater implications for the banking sector.
Online shopping in Europe will be cheaper and easier as of Saturday, thanks to the European Commission's new banking directive, PSD2.
While the directive introduces an array of new banking reforms, the first change customers are likely to see is the lifting of additional fees for online payment via credit card or bank transfer.
The biggest change, however, is slightly more subtle.
Under PSD2, banks lose their right to be the sole owner of a customer's account and transaction data.
The EU's new directive makes it possible for individuals to share their account data with authorized third-parties. This means, for example, that people with multiple European bank accounts will be able to store and pull up their financial data within a single mobile app.
More importantly, this also means that online vendors will be able to iake money directly from a buyer's account — provided of course they have the buyer's consent — skipping the slow and expensive card transactions.
"Many new suppliers are starting build such a service and will be applying for a license," said industry expert Philipp Rosenauer, a consultant at PricewaterhouseCoopers (PwC), an accounting firm.
According to a survey carried out by PwC in Germany, two-thirds of Germans said they would be prepared to grant authorized third-parties access to their data. Among people under the age of 30, 86 percent said they were willing. "For the younger generation, the bank is an app on their mobile phone," said Rosenauer.
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Nevertheless, the European Consumer Centers Network (ECC-Net) has advised consumers to only ever allow access via a thorough and secure authentication process.
Karolina Wojtal of ECC-Net also warned that third parties will likely be allowed to store and evaluate a user's data for a significant period of time.
All third parties that request access to an individual's account will be regulated by a banking watchdog, such as Germany's Federal Financial Supervisory Authority.
Banks to lose out?
Roland Berger, a German consulting firm, estimated that the introduction of PSD2 could lead to traditional retail banks seeing profits fall by as much as 40 percent in the long term.
The new form of payment transactions, the firm said, could also pave the way for new forms of securities and credit transactions. Ultimately, it could see the bank no longer boast sole direct access to the customer in any area, thereby merely taking on the role of background administrator.
Banks, however, could generate revenue by working directly with Fintech partners or by becoming third-party providers themselves, effectively turning the industry on its head. "However, a number of institutions won't be able to make the leap," said Julia Wiesermann, a consultant at AlixPartners.
dm/sms (AFP, dpa)