PSD2 Directive

PSD2 is a basement for a totally new financial system. It was created to widen the possibility spectrum for a financial market players. Directive regulates payment service principles, key consumer rights and market players collaboration models.


What is PSD2?

PSD2 is the second iteration of the Payment Services Directive (PSD) implemented by the European Union and it affects both individual consumers and businesses. PSD2 enables bank customers to use third-party providers to manage their finances. The regulation went live in January 2018 and has implications for all companies in Europe that deal with payments, ranging from how to regulate the emergence of Third Party Providers (TPPs) to the need for strong customer authentication (SCA).

Who is Impacted?

The rules and guidelines of PSD2 applies to modern payment services, including banks, credit unions, fintech companies, and payment companies (e.g., third party payment service providers, account servicing payment service providers, and payment information service providers) based in the European Union.

Security

One of the key requirements of the revised Payment Services Directive (PSD2) is that banks must add two-factor Strong Customer Authentication (SCA) for all remote access to customer accounts. This means that when authentication is required, two of three factors will be applied: something the customer is, something the customer has and something the customer knows. Clearly, identity verification will be critical as part of this, and when customers forget or lose a key component, banks will need to ask them to re-identify themselves.