The implementation of PSD2 represents an opportunity for countries to overhaul their financial infrastructures, forcing them to upgrade older systems so businesses and FIs can remain compliant and move money faster. While plenty of countries are seeing this as an opportunity to grow, some markets are still holding out. The Netherlands, for instance, only recently implemented it because it needed to make sure that consumers’ personal data will remain protected, as payments in the region are mostly digital.
According to Petra Hielkema, division director for payments and markets infrastructure for the Netherlands’ central bank, De Nederlandsche Bank (DNB), third-party payment players in the region must offer services that are not only trustworthy and digital, but go beyond the basics. DNB is responsible for approving PSD2 payment licenses in the Dutch market, so third parties will have to follow their guidelines if they want to continue operating in the region.
“The payments system in the Netherlands is quite efficient — it’s quite developed [and] really digital,” Hielkema said in a recent interview with PYMNTS, adding that this makes it difficult for FinTechs to implement new PSD2-compliant payment services that consumers can use and trust.
New players and legacy FIs alike need to keep customer comfort top of mind if they want to be successful under PSD2. Consumer comfort will only come when they are educated about PSD2 and open banking, and as such, one of the first problems FIs need to address is customer awareness.
PSD2 and the customer awareness problem
PSD2’s implementation in the Netherlands will lead to payments innovation, but these ideas need to appeal to customers who are already used to the speed of mobile, Hielkema explained.
“To be successful in the Netherlands, [FinTechs] have to be even more efficient than what’s already there … and they have to be considerate to price,” she said. “They can’t cost a lot, because the Dutch are not used to paying for paying.”
Before that can happen, however, consumers in the Netherlands must be made aware of PSD2 and how it may affect their data, Hielkema noted. A staggering 80 percent of Dutch consumers are unaware of the regulation and what it entails, which is proving to be a problem for third-party providers that need to gain enough consumer trust to be granted access to their payments data.
“What really should not be underestimated is the … need for privacy of payment data in the Netherlands,” Hielkema said, noting that one bank in the region proposed using payment data around five years ago. The country was unenthused, she said, adding that the new PSD2 law is viewed as “a way of regulating activity that is in the market already.”
To foster trust and grow customer awareness, DNB has launched a national media campaign. In addition, it is fulfilling its status as a regulator in the country by providing companies with supervised PSD2-compliance licenses, Hielkema said, noting that this ultimately helps protect consumers.
PSD2 compliance, licensing and consumer protection
As is the case with other countries in the EU, potential players in the Netherlands need to obtain a license to operate and collect data under PSD2. Since the official implementation of PSD2 in the country last month, DNB has had six providers apply, with another 14 considering submitting an application, Hielkema said.
“Once banks get the signal that the consumer has given consent for third parties to access payment data or initiate a payment, they will do a check to make sure that the third-party provider has a license,” Hielkema explained. “I think that’s a strong way to protect consumers, because banks will only allow those parties to provide those services if they [have] a license.”
These licenses assure consumers that they’re protected from fraud and that these companies that are collecting their payment data are being supervised, she noted, adding that these new regulations offer “more organization to protect customers.”
“The two [regulations] really provide for a framework that was absent before, whereas these [payment] services have been around for a while,” she said. Consumers are used to having choices regarding payment methods and speed of delivery, so financial players should consider privacy and transparency two of the most important factors to offer and adhere to.
Data privacy and the future of PSD2
According to Hielkema, PSD2 also represents a greater perspective shift in the broader financial ecosystem.
“It’s not PSD2 that’s creating the changes in the market,” she said. “PSD2 is a response to the changes that are happening in the market, to put some safeguards into services that are [being] developed.”
The regulation is inspiring both legacy and new financial players, Hielkema stated, which will lead to further payments innovations, such as instant payments.
“[Instant payments] is in testing now, so it’s small … but the idea is that, by the end of the year, instant payments [will be] the only [method] of payment in the Netherlands, no matter how you pay — by card, by internet, it’s always instant,” she said.
As PSD2’s presence within the Dutch market becomes more established, businesses and startups are going to make plays to earn a position in the region. On a global scale, the regulation will continue to push companies to further innovate their products and payment offerings. As to what that future ecosystem will really look like, we’ll need to wait and see.