PSD2
To fully understand Open Banking in Europe, it’s vital to also comprehend the European Union’s second Payment Services Directive, PSD2.
This EU regulation seeks to eliminate any monopolies financial institutions may have, in relation to user data. It has been designed to make online payments more secure through a process called Strong Customer Authentication (SCA) - increasing competition and ensure banking services evolve with new technologies.
Navigation: Open Banking APIs > PSD2 Explained
PSD2
To fully understand Open Banking in Europe, it’s vital to also comprehend the European Union’s second Payment Services Directive, PSD2.
This EU regulation seeks to eliminate any monopolies financial institutions may have, in relation to user data. It has been designed to make online payments more secure through a process called Strong Customer Authentication (SCA) - increasing competition and ensure banking services evolve with new technologies.
Navigation: Open Banking APIs > PSD2 Explained
Understanding PSD2
Fundamentally, PSD2 (adjoined with GDPR) gives third parties access to banking infrastructure and accounts, through Open APIs.
Unlike in the UK, Europe has not insisted on a single API standard which creates the risk of banks using thousands of different APIs – an issue they are now attempting to reverse engineer. It’s hoped that by eliminating barriers to data access, greater competition and further advances in technology will arrive.
PSD2 began progressively being enforced in January 2018. The biggest regulatory milestone was on September 14th 2019 when the authentication and third-party requirements entered into force.
Financial Institutions had an additional transition period, with the duration of Dec 31st 2020 being defined by the European Banking Authority (EBA). Due to COVID-19, this has now been postponed to 2021, as confirmed by the Financial Conduct Authority.
Strong customer authentication (SCA) is a requirement of the EU Revised Directive on Payment Services (PSD2), which ensures that electronic payments are performed with multi-factor authentication, to increase security.
For a more detailed look at SCA and PSD2, check out the conference video from GOTO Amsterdam 2019.
Understanding PSD2
Fundamentally, PSD2 (adjoined with GDPR) gives third parties access to banking infrastructure and accounts, through Open APIs.
Unlike in the UK, Europe has not insisted on a single API standard which creates the risk of banks using thousands of different APIs – an issue they are now attempting to reverse engineer. It’s hoped that by eliminating barriers to data access, greater competition and further advances in technology will arrive.
PSD2 began progressively being enforced in January 2018. The biggest regulatory milestone was on September 14th 2019 when the authentication and third-party requirements entered into force.
Financial Institutions had an additional transition period, with the duration of Dec 31st 2020 being defined by the European Banking Authority (EBA). Due to COVID-19, this has now been postponed to 2021, as confirmed by the Financial Conduct Authority.
Strong customer authentication (SCA) is a requirement of the EU Revised Directive on Payment Services (PSD2), which ensures that electronic payments are performed with multi-factor authentication, to increase security.
For a more detailed look at SCA and PSD2, check out the conference video from GOTO Amsterdam 2019.