Regulation and the changing face (and pace) of payments

Regulation and the changing face (and pace) of payments

In response to technological and market-driven developments, the focus of payments regulation has clearly shifted. The revised Directive on Payment Services (PSD2) is mandatory for all financial institutions in the European Union, with an implementation deadline of 1 January 2018.

Director, Management Consulting

KPMG in the UK

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This is a key piece of regulation designed to radically change the payment services landscape and the licensing of new categories of service providers. Firms need to think beyond the regulation itself and consider the wider implications on their business strategy in order to identify market opportunities.

The focus of EU payments regulation has shifted

The focus of EU payments regulation has been on protecting consumers and setting the rules for licensing market participants (PSD1), fighting potential abuse of its rules (EU Regulation 924) or setting standards of payments instrument within the European Union (SEPA). This focus has now clearly shifted to respond to the technological and market-driven developments and the wider political and economic growth agenda of the European member states – increasing competition and driving innovation in the payments space and improving access for users to payments instruments. This was recently discussed at the 3rd Annual QED Conference ‘The Future of EU Payments’ on 27 January 2016, in Brussels, moderated by Liz Oakes, Director, KPMG in the UK. 

PSD2 is mandatory – implementation deadline of 1 January 2018

PSD2 is mandatory for all financial institutions in the European Union, with an implementation deadline of 1 January 2018. This is a key piece of regulation designed to radically change the payment services landscape and the licensing of new categories of service providers. ‘Traditional’ FI’s – or ‘account servicing payments services providers’ in EU-speak – will have to provide access to customers’ accounts to third parties. These third parties are providing account information or payment initiation services with permission to access customers’ data via a specified API. 

Firms need to consider the wider implications on their business strategy

Open-mindedness to deal with this regulation-driven market transformation towards the digital world, may well determine how relevant institutions are going to be in the near future. In order to increase market share, it is important to not let compliance solely determine the change agenda, instead, firms need to consider the wider implications on their business strategy. 

PSD2 was recently adopted by the European Parliament in January 2016. KPMG recommends that firms think beyond the regulation itself – which may potentially be accompanied by additional associated domestic regulation e.g. the emerging open-API standard in the UK – but to consider their business strategy at this time of structural change in order to identify market opportunities. A strategic response has the potential to transform the underlying business and operating model in order to create new value and position the organisation for the new Digital Single Market.

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