A newly-issued white paper explores the implications surrounding – and the opportunities arising from – Europe’s revised Payment Services Directive (PSD2) and the Regulation on Multilateral Interchange Fees (MIF).
The white paper, entitled ‘Driving change with PSD2 and the MIF Regulation: Creating opportunities in Europe’, is published by PAY.ON, the white label payment technology arm of ACI Worldwide and consulting and investment banking services specialist First Annapolis.
PSD2 is part of the European Commission’s (EC) efforts to strengthen the internal European Union (EU) market, and has far-reaching implications for card issuers, acquirers, payment service providers (PSPs), and merchants. The paper’s authors suggest that access to the account is one area in particular where fast-moving innovators are set to disrupt the status quo, although incumbents also have the opportunity to solidify their position by creating new consumer services.
Requirements for two-factor authentication will also cause tension, as the industry strives to deliver a more seamless payments experience. Those PSPs, acquirers, and other players that can innovatively combine and balance security with a seamless payment experience stand to gain the most, according to the new paper.
Interchange fee caps will have the largest impact out of those areas covered by the MIF Regulation, suggests the white paper. Acquirers and PSPs already benefit from the lower credit and debit rates, but face technical and operational challenges due to new requirements regarding transparency and customer choice at the point-of-sale (POS).
Issuers, meanwhile, will lose revenue, often significantly. Merchants will benefit from the lower rates, although the trickle down for smaller merchants may take some time. Adaptation, claims the white paper, is required to seize these opportunities.
“As the rules continue to change, disruptors and innovators are positioned to benefit,” said Markus Rinderer, chief executive officer (CEO) and founder of PAY.ON.
“MIF Regulation redistributes the economics of the card ecosystem, while PSD2 will motivate innovators and disruptors to enter the market. As the long-term trajectory of the industry shifts, all players in the payment chain must adjust to ensure they are well positioned for the future.”
“The world of payments is changing; traditional participants have to evolve with the new payment ecosystem, whilst new entrants have to adapt to broadening regulation,” added Daren Wedge, senior vice president (SVP) North America and Europe, networks and processors for ACI Worldwide.
“All payment providers will have to think differently about how they maintain their existing systems. They will need to embrace ‘openness’.”
However, a London summit on the industry’s introduction of the technology cautions that testing and acceptance are still at an early stage and firms should proceed with caution.
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