German Implementation Act for PSD2 Directive in Force - Continental Drift on the Banking Market?

(German version available on CR-Online Blog)

The German Implementation Act for the PSD2 – the Second Payment Services Directive – already went into force on July 21, 2017, i.e. prior to the implementation dead-line on January 2018 (see German reporter BGBl. I No. 48 - 21 July 2017, pp. 2446). This implementation affects the Civil Law Code (BGB) currently in particular, §§ 505a, 675e, f and h - l BGB (see Art. 15 (2) of the Implementing Act).

Background: The Payment Service Provider Directive (EU) 2015/2366 affects the relationship between banks, customers and merchants (e.g. online shops) with regards to online payments and replaces the 2007 predecessor directive PSD 2007/64/EC. The PSD2 went into force in autumn 2015 and provides a transposition dead-line until 13 January 2018 – i.e. prior to the EU General Data Protection Regulation’s dead-line of 25 May 2018.

For business, PSD2 covers mainly two aspects:

• First – the opening of the online banking business for payment initiation service providers (PISPs) and account information service provider (AISPs)

• Second –the European Banking Authority (EBA) drafting of technical specifications for the PSD2 for the EU Commission – the so-called 11 mandates.

Opening Markets for PISPs and AISPs The PSD2 is likely to redefine the current market of online banking and cashless payment. PISPs and AISPs are subject to lower licensing requirements than classical banks, e.g. regarding equity. For example, some online shops could seek a PISP status, and thus execute online payments for their customers directly at their bank – just as if the customer himself would make an online transfer.

Credit card companies and acquirers are likely to be under pressure, as they have since exclusively facilitated the payment chain between the bank and the merchant with guarantees. From now on with the PSD2, some internet companies could trigger and conclude live payments of their customers even during the checkout in their web shop.

Market Changes Thus, the online payment world  is likely to face a major shift – i.e. a split, between banks - on the one side - and the online merchants on the other side. The reason is the market players primary focus on the supply of goods and services with the merchants and the customer assets with their banks. The current suppliers between these fronts are mainly driven by innovation constraints.

However, a slight imbalance may also exist between merchants and banks, taking into account customer habits - like who will a customer more likely visit, his bank or his merchant. While merchants could now offer simpler payment methods with the PSD2 in addition to their goods and services, banks will initially only be offering accounts and financing instruments. Thus, the visit to the merchant will be even more attractive in the foreseeable future for the customer – and the merchant can likely collect more personal data of the customer (a.k.a. "oil of the 21st century”) in future.

Conclusion The aim of the banks should be to create more interfaces (XS2A), that are both, consumer- and even more merchant-friendly. Banks are supposedly prepared for the post-PSD2 market, when their interfaces primarily serve three purposes:

• First, seamless integration with the merchant (i.e. diverse and stable API SDKs, fast and error-free response times);
• second, added-value for the consumer (e.g. payment instruments during checkout like installment payment) and
• third, visibility of the bank at the merchant – e.g. classic advertising for offers and customer advice by the bank.