PSD2

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Acronym #

The revised Payment Services Directive (PSD2) went into effect on 13 January 2018 across the UK and Europe.. PSD2 introduces new rights for certain third-party providers () to directly access payment service users’ online payment accounts with their explicit consent, and requires Account Servicing Payment Service Providers (ASPSPs), such as a bank, to permit access through a dedicated interface built on APIs. These PSD2 measures are designed to open up the banking industry to new players and promote the development and use of innovative online services, while ensuring consumer protection.

PSD2 provides the legislative and regulatory foundation for Open Banking and other broader initiatives at a UK and European level relating to open access to payment accounts. ref

Difference between PSD2 and Open Banking #

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PSD2 (Payment Services Directive 2) #

The Revised Payment Services Directive (PSD2) is an updated version of the EU legislation designed to enforce higher security standards for online transactions.

Differences #

There are a few key differences between PSD2 and open banking.

First of all, PSD2 is mandatory European legislation that applies to the EEA, Monaco, and the UK. Open Banking is only a requirement for the UK’s nine largest banks, although smaller banks and some based outside of the UK have also chosen to adopt open banking.

PSD2 and open banking are also subject to different compliance standards. While PSD2 is fairly unrestricted in its application, allowing payment providers to choose their own methods of fulfilling compliance criteria, open banking is limited to a predefined API to ensure a standardised approach.

Essentially, PSD2 and open banking standards work together to make digital banking safer, more streamlined, and more versatile.

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