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Card payments
Playing your cards right under PSD2
There are of course plenty of alternatives to paying with a debit or credit card online, including prepaid vouchers and services like PayPal. But whether it is buying from an online retailer like Amazon or unlocking content with a subscription, many of us simply reach for our cards.
PSD2 could be set to change that.
Payment Initiation Services providers (PISPs) will offer an alternative to cards by transferring money from the buyer’s account straight to the merchant. You simply will no longer need a card to buy online. This is probably good news for anyone who can’t resist an online bargain. It is certainly good news for merchants, who will have better visibility of payments, and who can look to instant transfer of funds, and freedom from the charges of card providers.
So consumers will save on products because merchants will no longer have to pass card fees on to them. However, it looks like anything but good news for card companies (and banks) who could be set to lose a significant proportion of their payment streams.
What’s more, the bad news for card issuers is not confined to a projected big cut in online use. Card fees will also be capped under PSD2. Interest rates and issuing fees both look to be curtailed across Europe.
The precise details remain to be worked out, but it looks certain that card companies need to prepare for a future that looks a lot more challenging than the past. Like banks, many are currently struggling with outdated legacy systems, which could leave them by the side of the road once the potential of PSD2 is realised, and the race to provide new kinds of service really gathers speed. There is a very real need for them to engage with developers who can help build infrastructure solutions to deal with the new market realities.
Of course, although the future may look a little less rosy, card companies do have some very real strengths to build on, not least large and established customer bases, and generally speaking a good deal of customer loyalty and trust.
If they can build on that customer trust and transform their current business models to create new services, they may be able to share in the benefits of PSD2.
Of course, to do that they will need the support of experts in the development and provision of new kinds of financial technology and software. At Trusek, we will be delighted to help providers find new ways to play their cards right.
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