Next stage of EU directive will create widespread customer disruption, say fintech bodies

European Third Party Providers Association (ETTPA), and The Financial Data and Technology Association (FDATA Europe), have jointly authored a paper - The Unintended Consequences of PSD2 RTS - which has been presented to the regulatory authorities in the EU and the UK.

Whilst fully supportive of EU’s second Payment Services Directive (PSD2)., the two fintech bodies have identified a series of unintended consequences of the Regulatory and Technical Standards (RTS), which are said to cause widespread disruption to consumers and businesses that use the services of many fintech applications. Notable examples include the impact on the many millions of businesses that use SME accountancy services such as Xero, Quickbooks and FreeAgent, unless steps are now taken.

The key issues are summarised as follows:

• Strong Customer Authentication, designed to improve the security between a bank and its customer, will unintentionally block access to non payments data, such as savings accounts and loan accounts, which are in very wide use

• The RTS provides no period of transition during which a TPP could seek to ask its customers to rejoin on the new technology. There needs to be a twelve month transition period after the banks have delivered a high quality API or Adjusted Interface to allow customers to migrate

• It is highly likely that on the current time table, the vast majority of banks will fail to deliver a suitable API and run out of time to then deliver the Adjusted Interface. If they simultaneously then introduce the new security measures, all access to account channels used by Fintech firms will be blocked.

FDATA and the ETTPA have suggested a new order which prioritises the needs of customers through a series of technical and practical measures.

The Financial Data and Technology Association was established in Europe to advocate for Open Banking in 2013, during the negotiations to add account aggregation to PSD2. and then formally incorporated in 2014.

The European Third Party Providers Association is the European trade association of bank-independent PSD2 TPPs. ETPPA is an international not-for-profit association organised under Belgian law. ETPPA formalises the former Future of European Fintech (FoEF) coalition, which was created ad-hoc at the beginning of 2017 to represent the interests of TPPs in the negotiations around the PSD2 RTS on SCA & CSC.