The European Union’s revised Payments Services Directive (PSD2) is dominating financial headlines throughout 2019, as the payments industry grappled with the associated operational fallout.
This regulation, full of acronyms and technical terms, with a date of entry into force deferred by multiple exceptions and exemptions, has brought upon a period of confusion, debate and a rush to adapt. While it is primarily the banking or financial sector that must comply while the regulator keeps a close watch, PSD2 carries impacts as well as opportunities for business across all industries.
In a world where customer experience is key, the post-PSD2 scenario revolves around data and so organizations of all kinds must prepare for this challenge by keeping an outward focus while reshaping their strategy. Application Programming Interfaces (API) lie at the very core of new business models, as the financial sector, compelled by PSD2, has already learned.
The EU’s implementation of PSD2 will make it easier for third-party services to provide better and more innovative options for customers. The same could be said for the insurance industry. PSD2 is a game changer as the directive gives insurance companies the opportunity to apply and obtain a license to operate as a third-party provider, therefore taking direct control of the financial aspect of the company’s relationship with the customer. That way, insurance companies may be able to access their payment information in real time after the customer has given consent.
Furthermore, access to policies would make it much easier for TPPs to develop and market their insurances as well as to provide additional services such as risk management and price comparison. By requesting access to a customer’s policies and financial data, insurance providers could better understand the customer’s precise insurance needs. This allows fine-tuning products offering customized quoting accordingly.
The insurance industry is getting ready to take advantage of some of the banking sector’s innovations and newly developed technology to catch up. Eurobits, drawing from previous experiences from the financial sector, aims to facilitate such transition through innovative API. This includes mechanisms for fraud detection, cross-sell and upsell, and insurance as a service. PSD2 is a challenge but also an opportunity for insurance providers to establish a new level playing field and strengthen their stance. We are already seeing the proliferation of insurance startups and apps that give customers control over their insurance coverage, and we believe many of Eurobits’ well-tested approaches can be easily applied to this sector.
In a PSD2 world, travel companies, like any other kind of retailer, have to work with financial institutions or card providers that offer SCA two-factor authentication and, at the same time, offer a seamless experience that encourages customers to return. Particularly, travel companies operating in Europe must rely on banking and technology partners to deliver PSD2 compliant solutions for their complex payments' ecosystem.
An important benefit of PSD2 is the opportunity to improve the customer experience. Thanks to Payment Initiation Services (PIS) such as Eurobit’s payment services, customers are able to seamlessly pay higher amounts of money, as compared to using a credit card, and to do so directly, thus reducing friction.
Furthermore, customers can receive personalized and relevant offers and information, and they will be able to pay for the services without leaving the app or website. As a starting point for that customer experience to be successful, travel firms need to be ready to let customers use SCA and to better understand the tools available to meet the PSD2 SCA regulatory requirements and manage the exceptions.
One of the areas of confusion that could impact travel firms as well as retailers across Europe and abroad, by their very nature, is in the area of cross-border transactions. Eurobit’s licensed payment services solution allows firms to rely on payment initiation to seamlessly transfer money to one another across the EU. As innovative experiences can also reduce fraud and increase transparency, there is a genuine opportunity to improve the buying experience for customers, and that does not only apply to the travel industry but also, largely, to any ecommerce, retailer and digital services provider.